Before describing the reasons why should you invest savings in the stock market, let’s see what answers you have for the following questions:

• How much return did you receive from your banks’ or financial institution’s saving last year?
• What’s your return on the investment in Gold last year?
• What is your return in investment on other than those mentioned above in the last year?

If your savings is in the bank’s account, for example, the maximum interest rate on saving that commercial bank paid as of June-July 2006 is 4.5% (by Nepal Bangladesh Bank., NCC Bank and Siddhartha Bank). The inflation rate on the year 2006 was 8% (Source: Nepal Rastra Bank). Your saving was decreased in real sense because the purchasing power of your money is decreased by 8% (as general price of goods and services were increased by 8%) while you got the interest rate of 4.5% from the bank (Note that this is the highest interest rate figure of banking industry, some banks also offer 2%). If you calculate your real rate of return from your savings of bank considering the highest bank interest, it will be -3.24% (minus 3.24 percent) i.e. your money was decreased by 3.24 percent last year.

On the other hand, you have the best alternative to invest your savings on the stock market. If you calculate the latest year’s return on investment in the stock market, you got 53.87 percent [(817.61-531.37)/531.37] because NEPSE on 31st Jan. 2007 was 531.37 and on 31st Jan. 2008 it was 817.61. The real rate of return is 42.47 percent i.e. your money was increased by 42.47 percent this year.

Of course, there is risk on investment in stock market; it is not a hundred percent safe investment vis-à-vis bank deposit. But if you can take risk, you will be certainly benefited by the stock market. It’s your decision on how much risk you can take; the more you take risk, higher will be your return. If you take less risk, even in this case your return will be higher compared to any other investment alternatives. To ensure that you don’t put all eggs in one basket, you can also diversify your savings in bank deposit and stock market. Take the right move and benefit.

Another strong reason for investing in stock market is that 90 percent of the market is dominated by commercial banks, development banks, finance companies and insurance companies. The financial performance of these companies is rapidly growing up.
Moreover, they are providing lucrative returns in terms of bonus share, cash dividend and right shares. So stock market could be a new avenue of investment for you.

Hence with proper knowledge of stock market, continuous tracking of the market performance and news and investing wisely in the companies stocks; you can maximize your return. But it is always a better idea to have advice of security analyst to buy or sell the stocks. Security analysts offer valuable suggestions and recommendation based on the continuous analysis and calculation of stock’s risk and return metrics and monitoring the miss-priced securities in the market.

Now you might be wondering why should I deposit excess money in the bank account when I can get higher returns by investing in the stock market.

Remember, the team of ResCon is always at your disposal for helping you with your investment dilemmas. We offer quality and best service for you to maximize your return.