Episode 2 - How to start saving money for your family’s future?

0:00 I think the world is moving towards uh from ownership of assets to access to assets right starting with as low as say 5,000 rupees Emi or sip not Emi sip uh gradually taking it up but doing it as soon as possible and just just doing it just doing it every every month after month after [Music] month what should your savings look like like what should you be saving with so I think so uh if I were to put a number to

0:32 it then I think when you are starting to earn money starting with your first job uh your target should be to save at least 10% of your net take home salary right how much to invest in fixed deposit and bonds versus how much to invest in equity markets is a very personal choice but what I assume is that any money that you need in the next four to 5 years small part of that money should be in stock markets okay but any

0:55 money that you need Beyond 5 years or longterm maybe 15 years 20 years right for your own retirement or for your child's education if you want to fund that almost 100% of that money should be in stock markets through mutual funds or through stocks if you can be big stocks but go through mutual funds select good quality mutual funds and invest over there so this is a simple onepage kind of a financial plan that everyone can

1:17 follow please look at stock markets as a way of investing in businesses and businesses are for the long term not for the short term you are not playing the casino you are playing businesses you playing is a wrong word you're actually looking at businesses so look at them from a long-term perspective that is the way money actually compounds look at your Investments as a snowball how does a snowball grow bigger it has a Long Mountain to fall right and it starts

1:40 small but gradually as it rolls on the mountain the the slope it grows bigger and bigger in size that's how money grows right money grows that's how compounding works why investing in is not advisable in real estate so uh I think we have grown in a society in India we have grown favoring real estate right parents grandfather they all favored gold and real estate right real estate is I think uh given uh an investment is always good when you buy

2:06 it at a right price whether it's stocks whether it's a real estate right gold of course is not an investment because the definition of an investment is something that earns you cash flows right gold doesn't earn you cash flow it only earns you cash when you actually sell it and nobody decides what's the price of gold would be but a real estate could be an investment if it's a commercial property or if it's a house that you buy and you

2:27 give on rent so that can be investment but the fact is that real estate prices in India have across the country have become so high right then you buying stuff at such an expensive price you don't get adequate rent the rent to price that you bought it the yield is not enough so that's the reason real estate could be a good investment if you buy it cheap if you buy it using your own money and you get a good rent on it

2:49 otherwise I think in cities like Bombay I don't see real estate as a good investment and then the followup question to that is should I be renting or buy a house in this Mark in this in these markets renting is definitely the way to go if you look at examples of uber and Airbnb those are examples where you actually don't need to own an asset right so rather I think the world is moving towards uh from ownership of

3:11 assets to access to assets right uh next question is as a beginner how do I know where to invest okay so I think uh if as I mentioned uh first know when you need the money if you are earning money and you don't need that money in the next 5 years put that money in mutual funds uh maybe get in touch with the financial adviser or maybe do online research there are websites which can help you

3:32 Morning Star is a website value research online is a website there are website which can help you find out high quality mutual funds and uh if you can get hold of a good financial advisor the best way is to go through that person start investing in mutual funds uh let your money compound as soon as possible now we've been talking about compounding but it's a very important concept the most important Concept in compounding there are two variables three variables in

3:59 fact the money that you start investing the rate of return that you earn on that investment and the time during which you earn that rate of return most people are looking at the rate of return but most people are ignoring the most important Concept in compounding which is time mhm right just to give you an example if you were to grow your money 100 times in 25 years right one rupee becomes 100 rupees in 25 years you need 20% annual rate of

4:26 return you don't need 50% you need 20% annual rate rate of return return for 25 years first 20 years will take you from 1 to 40 from 40 to 100 which is the 60 part comes in The Last 5 Years right that is compounding compound is back ended you don't see the benefits of compounding earlier but if you start investing early as small as 5,000 rupes starting with as low as say 5,000 rupes Emi or sip not Emi sip uh gradually

4:52 taking it up but doing it as soon as possible and just just doing it just doing it every every month after month after month okay somebody ask what are the risks involved in investing for more recipes conversation DIYs for kids don't forget to subscribe to our Channel and hit the Bell icon so you never miss a video from kidsstoppress.com