MEGASITY
New member
‘Investing’ in definition means to sacrifice purchasing power today to gain a higher purchasing power in future. Now for most people purchasing power simply means more money. However, purchasing power really means that value of money and what it can buy in any given point of time. Let's look at an example: I have 6 lakhs and it has the purchasing power to buy a maruti swift. Instead of consuming this money to buy the car, i invest in maruti suzuki stock and decide to postpone my car purchase by 5 years. After 5 years, i realize that my investment in the stock has quadrupled to 24 lakhs but the price of maruti swift has only doubled from 6 to 12 lakhs. Now i have the purchasing power to buy two swifts with my money or buy a honda city worth say 20 lakhs which was far beyond my purchasing power 5 years ago. This is how stock market investing really works. You invest in really high quality companies with low debt & high return on equity. These companies sell valuable products and services thus making high profits and increase their sales and earnings year after year and this is ultimately reflected in the stock price. As a shareholder you are a part owner of the company so you have right to get the partial profits or losses made by the company. The fluctuation of price because of the daily market volatility does not mean anything as ultimately the real value of the company gets reflected in the price over the long term. If you manage to stay invested in such high quality companies for a few decades, the chances of your small amount of money multiplying by 100–1000X is quite possible thus making you enormously wealthy. Many people (particularly parsis, gujratis & marwaris) who invested in companies like Nestle, ITC, Reliance in late 80s early 90s and held on to their investments through all ups and downs are filthy rich now. They can buy anything they desire from big bunglows to luxury cars just from the dividends and dont even have to sell their shares.
