One question that most of us get while we grow up is, “What do you want be once you grow up?”. We may give multiple answers depending on what our motivation is – money, passion, fame, etc. One thing that goes unsaid, but is understood by all of us is the fact that we need money to sustain and enjoy our lives. I bet none of us ever said that they want to be bankers or investors. The reason is that very few of us really understand the real importance of understanding finance. We all get lessons about the importance of savings, but very few lucky boys and girls must have received lessons about the importance of investing! The reason is the same as the one, which explains why a small 1% of the population controls most of the assets and resources. Very few people actually understand finance and the importance of investing like High Networth Investors (HNI) do.
Money is a man made concept that determines the value of each and every good and service in the World. It is a value that keeps changing everyday. The value of money has been decreasing since its creation, .i.e. the Rs 100 that you have today depreciates everyday. The things you could buy in Rs 100 today may be worth more than that in a year’s time. That is they become expensive, its value increases and conversely, the value of money has decreased! Thus, the money that you earn today will keep losing its value as time passes, but are your earnings increasing at the rate which the currency loses value? No!! It doesn’t
The only solution for this is to either have a job that lets you save so much that you don’t have to worry about money or you have investments/ assets that keep paying dividends and interest every month. Honestly speaking, the first option may sound easy, but actually it is the second one that is easier! A sound understanding of basic finance can help you get a solid footing in the world of Finance and Investing, thus creating a passive second income other than your monthly salary.
Being able to read financial statements, annual reports and balance sheets of companies is very very important. Without this knowledge, it is difficult to understand what a company does. You need this knowledge to understand how they spend and earn their money, to understand how and why the price of their stocks fluctuates. This is the knowledge that earns Mutual Fund House CEOs Rs 50 Lakhs a month!!
BSE Institute Ltd is a decade old institute that offers courses in understanding all major and minor financial concepts, right in the middle of India’s financial hub, Mumbai! It offers multiple courses for executive education for students, working professionals and housewives in order to become excellent investors.
Every investment that you make, be it bonds or anything else, the basic fundamental will always be understanding the company that you are investing in! Without understanding these numbers & ratios, it is next to impossible to be a successful investor.
Having said this, real estate may be one of the few investments that is not heavily dependent on reading numbers. It depends heavily on understanding the local geography and the plans for developments. However, the upfront investment in this is huge with a lot of uncertainty. This is why many people advise against investing in real estate.
Many serious successful investors will argue that the best way to invest and get rich is to listen to good advice. The best advice is the one which you give yourself after listening to multiple people. There may be many schools of thought when it comes to investing and Finance, but it is best to first learn things and then help yourself as – “Self help is the best help”.