The necessity to invest

Aakash Ahuja
2 min readApr 7, 2021

Image source

These numbers in the header image are from Statista. They show the inflation rate in India (at the time of writing, values for 2021 and later are projected values). Between 2004 and 2021, this is an average of about 7% plus a margin of 2% on either side.

Here is another set of numbers: Starting salary in IT between 2004 and 2021. Most people we checked had average starting salaries around Rs. 15,000 gross per month in 2004. Today that number stands at about Rs. 28,000 gross per month. There is no data to definitely substantiate these numbers. They are seen on various internet sources. But if these figures are correct, then the year-on-year earning capacity between 2004 and 2021 has grown roughly by 4–4.5%.

So in the last 17 years, while the average cost of living has gone up by roughly 5% every year, the average earning capacity has increased by under 5%.

Like all numbers in finance, these numbers are based on past data and may change in the future. But let us agree that there isn’t going to be a drastic change. Our earning capacity will always increase in line with the cost of living. And one cannot be wealthy if one continues to spend at the same rate as one earns.

Now let us look at another set of numbers: NIFTY or NSE-50 was opened around 1880 in Jan-2004. On Jan-2021 it opened around 13950. In the 17 years, even a passive investment in an Index fund would have given a year-on-year return of 12.53%. In theory, active direct investing could have yielded even more returns.

Can there be any other definitive reason to invest?

Originally published on