Is it a good time to invest in shares in India?
History has proven that shares or stocks are the best form of investment to get good returns on your money. So the answer to the question “Is it a good time to invest in shares in India?” Our answer will be, it is always a good time to invest in shares, especially in the Indian stock market. The value of good shares in a growing country like India will just continue to increase at a regular pace over the years and will give much better returns that other forms of investment like Bank Deposits, buying property or gold, etc. The trick is to invest in shares of good Companies.
The shares of good companies keep on appreciating in value every year. On top of this, they pay good dividends every year. When you need cash in an emergency, it is easy to sell some shares for the amount of money you need. This means you can sell the right quantity of shares to get the required cash.
Are Shares better than Bank FD
In fact, shares are better than putting your money in the bank FD. You must pick shares of companies that are part of a Country’s Share index. For example, from the BSE SENSEX, the 30 best shares of Companies in India. Or, you could choose from any of the 50 Companies included in the NSE NIFTY Index of India. These are all the best companies in India. The shares of these companies are going up in value all the time and they pay regular yearly dividends.
Share Market in India today is very mature. The values in Indian Share Market is sure to go up in the coming years. You should be investing in shares of blue chip Companies during your working years. This will be a good foundation for building a fortune for yourself by the time you retire. The trick is to make sure you buy shares of Indian Companies with a good future. This is what the rest of this site is about – How to pick the right shares of Indian Companies with a good future.
Shares Vs fixed deposit, is investing in shares better than FD in banks
To compared Bank Fixed Deposit Vs Share buying, let us take a real-life example. Say I had Rupees one lakh to invest in 2010 January. If I had put this ₨ 1 lakh in a Bank as fixed deposit with interest, of say 10%, compounding every year. Now in early 2020, after 10 years, the total money I will get back will be Rs.2,85,313. This figure arrived at by compounding or multiplying the 1 lakh by 1.1 (10%), 10 times (10 years). So my one lakh becomes 2,85,313 after 10 years, that is my 1 Lakh has multiplied 2.85 times in 10 years.
If I had invested this One Lakh in Gold: The price of Gold (24 karat per 10 grams) in 2010 was average ₨.18,500-. Today, 24 January 2020, the price of Gold (24 karat per 10 grams) is ₨.41,270-, that is a multiple of approximately 2.23. So Bank Deposit looks better in this case. But in real life during the last 10 years Bank Deposit rates have been falling and now it is around 7% only.
Now to compare what I would have made had invested this Rs. 1 lakh in the SENSEX 30 Blue Chip Company, Hindustan Unilever (HUL) in 2010. The price of Hindustan Unilever HUL shares in January 2010 was ₨ 235. So for 1 lakh at a price of 235, I would have got 425 shares (approx). Deducting about 3% commissions, taxes, etc. it would be say 410 shares of HUL. The market price of HUL at closing on 2020 January 24 is ₨.2,073-. Therefore the value of this 410 shares of HUL today, 24 January 2020, is 410×2073= ₨.8,49,930-, an increase of over 8 times in just 10 years. On top of this multiplication factor, every year HUL paid handsome dividends.
The lesson leart here is that shares can give you the best returns on investments in India. You have to be careful to put your money in selected Blue Chip Shares which are included in the BSE SENSEX 30 Share Index. Also you should follow the golden rule of investment, "Do not put all your eggs (investment) in one basket". This means only a part of your total investments should be in Shares.
Good companies pay dividends every year
Apart from the increase in the value of the HUL shares, HUL pays regular dividends. We will make calculation with the actual dividends HUL paid during the last 7 years plus.
| Year | Shares | Dividend per Share | Income |
|---|---|---|---|
| 2010 | 410 | 6.5 | 2665 |
| 2011 | 410 | 6.5 | 2665 |
| 2012 | 410 | 7.5 | 3075 |
| 2013 | 410 | 18.5 | 7585 |
| 2014 | 410 | 13 | 5330 |
| 2015 | 410 | 15 | 6150 |
| 2016 | 410 | 16 | 6560 |
| 2017 | 410 | 17 | 6970 |
| 2018 | 410 | 18 | 7380 |
| 48,380 |
The total income from the 410 share in HUL for the last 10 years is ₨ 48,380-. Thus in essence our 1 lakh investment in HUL in 9 years gave us a total return of ₨.8,49,930+48,380 =8,98,310 (2019 dividends not counted). From the Fixed Deposit in the Bank, we got ₨ 2,85,313-. In this case your return on investment in HUL is more than 3 times what you would get if the money was kept as a Bank FD. So you can see that investments in shares of good Companies are better than putting money in Bank FD.
Now you may ask what about if I had put it into a property. Yes, maybe the property appreciation will be more, but what about all the problems of converting your property into money. You have to first find a buyer. Since most property deals involve black money, you may get paid in a briefcase full of high-value currency notes. You have to live in fear and hide this money from robbers. You will be on the lookout list of income tax inspectors because you sold a property. Plus other problems like land tax, property tax and what not.
Sales of Shares takes place online and are very fast. Share sale money transfer to your bank account takes place within 72 hours.
Investments in Gold compared with the Indian share market
SENSEX, almost always gives better returns. See our page is it better to invest in shares, property or gold
Is share investment good
You can accumulate shares, by buying shares in small quantities. You can buy shares every month or whenever you have spare cash. Nowadays, in India, there are no physical share certificates as in the old days. Your holding of Shares is now kept in the ‘Demat’ form. How to open a Demat account is explained on our page on share market basics. With a Demat account, the process of buying or selling shares online is very simple. The shares you buy or sell gets credited or debited from your Demat Account. The Demat linked bank account gets debited when you buy shares and credited when you sell shares. Thus the process of investing in shares in India is very simple.