Investing 101: Why Invest? Part-1

This is part 1 of a multi-part beginner series for Why and How to get started investing. I will try to lay down my motivation for investing, tools and practices to find great companies/startups that create enormous value for society and in turn the shareholders.

I started investing in the stock markets about 2 years ago. I wish I had started a lot earlier.

My jumping off point was “Rich dad, poor dad”, a good book for someone who is a beginner and wants to learn how money works.

My key takeaway from the book was: “Have more assets than liabilities”.

Photo by rawpixel on Unsplash

If you’re new to the world of financial jargon(like I was when I started), assets and liabilities might sound big but like most jargon, they are not-so-complicated to understand concepts. Assets are something you own and that increases in value over time and liabilities are expenses, debt or obligation. If you have more assets than liabilities, your net worth/wealth can’t help but increase over time.

Net worth = Asset – Liabilities.

What’s important here is the definition of an asset. An asset is something that grows in value without your intervention. So by this definition, your job is not an asset you are just trading in your time in exchange for money. 

A good example of an asset is a house. A house, in most cases, will go up in value over time, even when you are at work or sleeping or on a vacation. Your money will work for you.

Making your money work for you regardless of what you’re up to is one of the simple ways to create wealth and good long-term investing it is the way to do that.

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