Why should you invest?

You will not have to work!

You probably have heard the phrase “Let your money work for you!”. Just incase you do not understand what exactly this means, let us explain. The whole idea of investing is that you create or buy an “asset”.

What is an asset?

An “asset” is something that generates money. Just to give you an example, if you buy a flat for 4 lakh and then rent it out for Rs.3000 a month then you have created an asset. An “asset” that generates Rs.3000 a month.

However, this is just one type of asset. Assets are of many kinds. If you have a “copyright” or patent in your name, for which you get paid a certain amount when anybody uses it, then that too is called an asset. If you own a small pay phone from which you make just Rs.20 each day, then that too is called an asset!

The above given explanation is very crude, but that is the basics of investing. You want to invest the money you make in assets. Assets that generate money. The idea is that once you invest your money in enough assets, you can stop working. All your assets will make money for you. You can then use this money to enjoy life. Or you can use this money to invest in more assets that generate more money! So all this gives us the phrase, “Let your money work for you!” This is the main aim of investing. However, there are many other smaller aims of investing and we have explained them to you next...