Why to Invest – The Purnartha Take

Why to Invest - The Purnartha Take

Why Invest?

Well Having a savings account isn’t enough

Saving money is important, but it’s only part of the story. Smart savers start by building sufficient emergency savings within a simple savings account. But after building 3 to 6 months of easy-to-access and withdraw savings, investing in the financial markets offers many more potential advantages.

Why smart investing matters

Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value.

The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.

The power of compounding

Compounding occurs when an investment generates earnings or dividends, which are then reinvested. These earnings or dividends then generate their own earnings. So, in other words, compounding is when your investments generate earnings from previous earnings.

If you invest in a dividend-paying stock, for example, you might consider taking advantage of the potential power of compounding by choosing to reinvest the dividends.

The risk-return tradeoff

Different investments offer varying levels of potential return and market risk.

Risk is an investment’s chance of producing a lower-than-expected return or even losing value.
Return is the amount of money you earn on the assets you’ve invested, or the investment’s overall increase in value.
Investing in stocks, for example, has the potential to provide higher returns. In contrast, investing in a money market or a savings account likely won’t offer the same return potential, but is considered less risky than investing in stocks.

The amount of risk you carry depends on your appetite — or tolerance — for risk. Only you can decide how much risk you’re willing to take for the potential of higher returns. But if you’re seeking to outpace inflation, taking on some risk may be necessary. An increase in risk may provide more potential for your money to grow.

To maximize the benefits of compound interest, start investing as soon as possible and automatically reinvest your dividends and other distributions. Read how purnartha.com has given returns that beat benchmarks on investments using long term stocks.

India signs $39 million pact with World Bank for Assam project.

India signs $39 million pact with World Bank for Assam project.

India today signed a USD 39.2 million (over Rs 251 crore) loan agreement with the World Bank for the ‘Citizen Centric Service Delivery’ project in Assam. The programme size is USD 49 million, of which USD 39.2 million will be financed by the Bank and the remaining amount will be funded out of the state budget, the finance ministry said in a statement. The programme’s duration is 5 years, it added. According to the statement, the objective of the project is to improve access in the delivery of selected public services in Assam. The Project adopts an integrated approach to improve access and accountability.

One nation, one tax department: I-T takes cue from GST

One nation, one tax department: I-T takes cue from GST

The one-nation, one-tax principle that underlines the goods and services tax (GST), set to be rolled out on July 1, could be adopted in a much more broader sense by the income tax department through a path-breaking initiative on jurisdiction-free assessment.This would mean that a taxpayer in Mumbai could be assessed by an income tax officer located in Patna, a significant leap toward eradicating corruption by reducing the need for face-to-face contact between citizens and tax officials to the absolute minimum besides speeding up processing. The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles with the whole country becoming one jurisdiction. This, it is hoped, will put an end to a system in which bribery is said to be used as a tool to ease processes through human intervention.The key catalyst for such a significant reform is the massive shift toward e-filing of returns, which is already jurisdiction-free with returns going to the Central Processing Centre in Bengaluru. In the last financial year, over 42.1 million tax returns had been filed online by February. The number of e-returns processed by then was 43 million, which included some backlog from previous years.

India decision-day guide: RBI may tone down rhetoric on rates

India decision-day guide: RBI may tone down rhetoric on rates

India’s central bank is expected to keep policy interest rates unchanged, but may lower inflation forecasts and dial back its hawkish rhetoric on price pressures, paving the way for a possible reduction later in the year. All bar two of the 50 economists surveyed by Bloomberg News expect the Reserve Bank of India to keep the repurchase rate at 6.25 percent on Wednesday. Two economists expect a cut in the repo as well as the reverse repo rate as inflationary pressures cool and growth drops to it slowest pace in two years. None expect any change in the cash reserve ratio. If Governor Urjit Patel cuts rates, he will take the repo rate to its lowest in over six years and will continue a string of surprises that he and the monetary policy committee have sprung on investors since taking over in September last year. In April, the monetary policy committee raised the reverse repo rate in a bid to tighten liquidity conditions after having shifted to a neutral stance in February, ending a two-year easing cycle. In December, when almost everyone was expecting the central bank to cut rates after an unprecedented cash ban hurt activity, Patel held rates. And in October, while chairing his first MPC meeting, Patel cut interest rates even though a majority were expecting him to stand pat. In April, the monetary policy committee raised the reverse repo rate in a bid to tighten liquidity conditions after having shifted to a neutral stance in February, ending a two-year easing cycle. In December, when almost everyone was expecting the central bank to cut rates after an unprecedented cash ban hurt activity, Patel held rates. And in October, while chairing his first MPC meeting, Patel cut interest rates even though a majority were expecting him to stand pat.The monetary authority will announce its decision at 2:30 p.m. in Mumbai followed by a press conference 15 minutes later.