Tuesday, May 10, 2016

Pamper Yourself or Invest in Stocks?

An important question that haunts many a white-collared,  well-to-do, corporate executives is, "Pamper Yourself or Invest?". Everything is out there in the universe - Armani suits, TAG Heuer watches, luxury cruises, stocks, stock exchanges, share prices, stock news. Some are dry and boring like the stock news while others are alluring - the choice is solely ours!

Opportunities to Splurge

A leading economic news paper published a titbit that an airline has launched the world's most expensive, one-way, fare of US$ 38,000/- between New York and Mumbai.  The offering comprises of a bedroom, lounge & shower room.  The cabin comes with a double bed with designer linen, spacious shower, a 32 inch flat screen TV, double dining table, etc.  In comparison an economy class ticket on the same sector will cost under US$ 500.

Wise read stock news, learn stocks, stock exchange, share prices

This is a perfect example of the dilemma, "Pamper Yourself or Invest in Stocks?"

A sane and calm introspection will certainly help us realise that the aspirational offering of the airline is not only 76 times more expensive - with the money spent on a few hours of luxury one can create a significant value investment portfolio, that has the potential to grow into nearly US$ eight millions (the future value of investment calculated over a period 37 years, after inflation, based on the historical returns of 15% per annum yielded by Indian stock markets).

I see many bright youngsters  earning handsome salaries in software, retail, e-commerce and other such well paying sectors, and splurging on expensive clothes, eating out, discotheques, etc.

Wise read stock news, learn stocks, stock exchange, share prices

The consequences of buying unnecessary things could prove to be too costly in life.

Wisdom of Investing

On the contrary Warren Buffett, a successful value investor, even after figuring on the top three richest list, leads a frugal lifestyle.  He self drives an old car, flies economy class.  In short, he has mastered control over the urge to splurge.

Well, actually it is not a great sacrifice!  Those who realise the potential of returned generated by stock market today, and the power of compounding, will never spend on pampering themselves and certainly think many times before spending even a dollar.

When you realise that you can buy a handful of shares of a blue chip company for the price of a family meal in a neighbourhood restaurant, or no less than 100 shares of the same company, for the price of a family holiday, which can give you tax free dividend income and capital appreciation for the next hundred years, the choice becomes quite obvious and simple.

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I am not suggesting that one should not spend and enjoy life, but only emphasising that one should try to keep ones needs simple, control the urge to splurge and wisely invest in stocks and mutual funds to earn financial freedom and create significant wealth. It is beneficial to read stock news, learn about stocks, stock exchange, share prices and mutual funds.