Importance of Finance

I think there’s not much difference between air/water and ‘money’. Money is very important to sustain life. I’ve met many hypocrites talking obnoxiously about money but at the same time running behind it madly. I think money should not be the top priority but it definitely demands your attention. So, I believe finance is an art that how effectively you manage your money. I firmly believe that everyone should be taught Personal Finance so as to develop the quality of saving and investing which are vital for the future. Investing is not something fancy but a very scientific thing undoubtedly. We all know that inflation plays its role and erodes some value from your money.

Inflation rises i.e. the increase in the price of goods is due to the increase in aggregate demand. The increase in aggregate demand can be attributed to various factors like population, taste and preferences, trends, etc. So, it’s really important to grow your money with time. So, it would not be an exaggeration to say that investing is mandatory for a good life. I was listening to an interview where Robert J.Shiller of Yale University said that “A financial doctor is as good as a normal doctor”. He further said, “health and wealth go together”. So, Finance can’t be ignored. But with time, people are realising that earning and managing money are 2 different things.

Further, people become a lot panicky while investing especially in equity markets. The share market has turned really fancy these days. People, who invest in equity markets boast about it without assessing that are they even ready to tackle that risk? Stock Market is indeed one of the best options to invest in due to it’s a higher return. But we have to remember that risk and return go together. Higher the risk, higher will be the return. So, you have to assess your risk-taking capability. Less Risky assets like Government bonds and T-bills can be a great option for someone who wants steady and stable returns.

But, according to me, one should invest in many securities like bonds, equity, government schemes, etc. This would make his whole portfolio diverse comprising of both risky and riskless assets. By doing, his or her chance of losing all the money (if concentrated in a single asset) would be eliminated and at the same time, his option of getting better returns from riskier assets like equity shares remains open. Warren Buffet has even said that your investment journey in stock markets can be beautiful and you can end up having a lot of return if you invest in the value of the share. Basically, he meant to say that if you invest by assessing the company’s past financials and the future vision (i.e. the company’s fundamentals), you can earn a good fortune out of that. In contrast, the price of a share can be really deceiving as it goes up and down daily. So, investing on the basis of price is really risky and converges with speculation.

So, I would conclude by saying that Finance is a way of living.