Given a choice where you invest your money? Which one is best investment option as per you? Well, an answer to this question varies based on person to person. Let’s try to do one small exercise. Take a quick break of two-minute and answer one simple question. Which one is best investment option as per you? Your answer could be –
- Fixed deposit
- Mutual Funds
- Real Estate
- Stock Market
Well, if your answer is fixed deposit, mutual funds or real estate your answer is wrong. As per me, Stock market is one of the best investment option. Let me prove my argument with some examples and statistical analysis. After going through this post, you will also agree that stock market is one of the best investment option.
Best Investment Option – Stock Market
Example – Maruti Suzuki Car Vs Maruti Suzuki Shares
Owning a car is considered a necessity. A car is owned by even a middle-class family today. The first name comes to our mind while buying a car in India is Maruti Suzuki. Maruti Suzuki is the most trusted brand of Indian automobile industry. A car of Maruti is popular for efficiency, features, quick service and economic price.
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Among all models of Maruti Suzuki, Maruti 800 was one of the most popular cars sold by Maruti. Maruti 800 car is now end of life. The price of Maruti 800 was approximately 2 Lakh. If someone has purchased Maruti 800 car in 2003, he would have paid 2 Lakh. After 14 years of usage, the car must have become either junk or unusable. No one will be ready to purchase it.
However, on the other side instead of buying Maruti 800 Car, if you would have purchased a stock of Maruti Suzuki, you would have become Crorepati.
Let’s try to understand this by doing a simple mathematical calculation.
- The price of a single share of Maruti during IPO in the year 2003 was Rs.125.
- If you would have invested 2 Lakh in 2003, you would have got 1600 shares of Maruti.
- On 1st Aug 2017, a share of Maruti has touched all time high Rs.7920.
Total Value of Stock on 1st Aug, 2017 = 1600 x 7920 = 1.26 Cr
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Note – Above calculation does not include any dividend amount paid by the company during 14 years.
So, you would have become crorepati if you have deferred your decision of buying a car and invested in the stock of Maruti Suzuki.
Example – Fixed Deposit in Bank Vs Stock investment of same bank
Let’s take one hypothetical example. Two friends Ravi and Raj wanted to invest Rs. 5 Lakh for the long term in the year 2009. Two options were given to them for the investment.
- Option -1 – Invest Money in Fixed Deposit of Yes Bank.
- Option -2 – Invest Money in Stock of Yes Bank.
Ravi was a conservative investor he selected fixed deposit as an investment option. On the other end, Raj was a smart investor and he opted for Yes Bank stock.
Ravi got 7.25% return from the fixed deposits. On the other hand, Raj got CAGR return of 61% from the Yes Bank stock.
The stock price of Yes Bank in March 2009 was Rs. 40 so Raj got 12500 shares of Yes Bank. Raj sold these stocks recently with the price of Rs. 1844 in July,2017. Raj Invested Rs. 5 Lac and in return, he got 2.3 Cr in 8 years, whereas Ravi Invested Rs.5 Lac and got Rs 8.88 Lac in return.
- 5 Lac Yes Bank Fixed Deposit in 2009 @ 7.25%
- Current Value = 8.88 Lac
- 1200 Shares of Yes Bank in 2009 = 5 Lac
- Current Market Value = 2.3 Cr
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Example – Royal Enfield Bullet or Eicher Motors Shares
Suppose before 7 years you were in need of a vehicle and you purchased Royal Enfield Bullet of Eicher Motors worth Rs. 1.35 Lac. On the other hand, your friend was also in need of a vehicle but he decided to postpone his requirement. He invested his money Rs. 1.35 Lac in Eicher Motors shares. The stock price of Eicher Motors was Rs.216 in the year 2009. He got 625 stocks in his portfolio.
He recently sold Eicher Motors stock with CMP of Rs. 32000 and got 2 Cr in his kitty.
- Cost of Royal Enfield Bullet (Eicher Motors) in 2009 = 1.35 Lac
- Current market value = 1 Lakh (Approximate)
- 625 Shares of Eicher Motors in 2009 = 1.35 Lac
- Current market value = 2 Cr
I hope with above examples are enough to convince you that stock market is one of the best investment options and it gives a very good return over a long run.
Do share your views in the comment section given below.