Ant or Grasshopper?

Narasimhan A R

The moral of this classic parable goes saying “be prepared for the day of necessity”. This illustrates the fundamental differences between savers and spenders. The lifestyle of current generation witnesses sea change in their spending pattern – be it fixed commitments on housing, car, technology gadgets, or party, eating out etc.,. This really compels one to revisit their thoughts and think about investment strategies.

Why should one invest?

Reason 1:

Inflation is one of the main reasons for an investment to become inevitable. To put it in lay man’s language, it is “an increase in the price you pay for goods”. In other words, one has to pay more money to purchase the same product over a period of time.

Let us assume a product requires Rs.100/- to purchase today and the inflation rate is 12% for next 10 years. At the end of 10th year the same product would require Rs.311/- to purchase.

Therefore, if the after-tax return rate is less than the inflation rate, then your rate of return on paper will actually be result in negative return. Hence, it is always wise to look at the real rate of interest that the offered rate of interest.

Reason 2:

If the money is put idle i.e., without any investment it not only losses opportunity income but also ruins what one has today.

Reason 3:

One has to meet future expenditure – like dream homes, children education, marriage, medicines etc., unless sufficient investment backup exists old age will become a lurid
Now, I leave this to you to decide what you want to be – Ant or Grasshopper