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The Biggest Risk to Your Investments Might Be Your Neighbour

I am talking about the unemployed Indian youth, who has the potential to create big trouble for the country in the future, if his aspirations are not met.

Of course, the choice of bad investments, rising inflation, rising interest rates, or a weak economy also pose as big risks to your investments.

But then, these are some of the risks that you can see now. And over that, these are risks that are manageable to a great extent.

But who can manage or control a youngster, without a job for months and years, with himself and family to feed, and not knowing what to do to meet his basic needs?

Now imagine millions and millions of such youngsters and what their combined force can do to bring a country down to its knees, and with the it entire economic and financial system.

We saw a glimpse of such uprisings recently in the Middle East and London. Governments were overthrown, properties were burnt down, and shops were looted. There was social unrest everywhere.

“But why are you trying to create this unnecessary fear in my mind?” you might ask.

I am not trying to do that, my dear friend. I am just trying to show you the possible consequence for a country with an ever-rising population and not enough new job creation.

Here is a chart that creates this fear in me. It shows the past and future global population as per the United Nations data. See how India’s population is going to explode.

The World’s Population Explosion

Source: The Guardian

In a few years’ time, we will become the world’s most populous nation. And if the current poor rate of job creation is to continue, we will soon be staring at a social issue of unimaginable proportions – that is if millions of youths who pass out of thousands of India’s colleges every year do not get proper employment.

Now, this is a risk that doesn’t make it to the headlines, and it is most certainly not going to be breaking news on the television.

But it’s a real risk that you must prepare for, as it holds the potential to throw all your investment calculations out of order.

So, should you invest at all?
Well, the thing with risk is that while we can’t control what we can’t, we must control what we can.

In this case, we can just hope that India’s unemployment problem does not turn into a massive, unmanageable monster.

But, in any case, ‘not investing’ must never be the option.

The rate at which the price of everything is rising – food, power, education – there is no way you have but to invest in good quality inflation-beating stocks that can help you grow your money faster than inflation over the long term.

These can either be companies that have the pricing power – the ability to raise their product prices and still be profitable – or companies that consistently pay good dividends.

However, given the huge social risk that I just talked about, the only way you can accommodate it in your investing is by lowering your return expectations.

A 12-15% annual return from good quality stocks must not disappoint you. Chasing anything higher can be dangerous.

So, let things take care of themselves. You take complete responsibility of your investments. All the best!

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

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