According to data from the National stock exchange (NSE), there are 1.2 crore active investors in India, a country of 138 crore people, as of August 2021. Even though this number is rising and better from the previous data, investing in stock markets still remains as a stigma for many. From our generally conservative attitude to lack of proper knowledge about stock markets, reasons could be many. Let’s try and understand why most Indians hesitate to invest in the stock market.
One major factor that keeps Indians away from investing in stock markets is the lack of knowledge about it. A lot of people have this assumption that stock market is something that is hard to crack. That thought could be rooted from the basic fact that nobody has ever tried to make them understand what the stock market is and how investing in it works.
Unlike in the past, a lot of stockbroker advertisements air on TV and social media these days and that could be one reason why we are seeing a slight increase in penetration compared to the previous years. Even then 98% of Indians are still steering clear of investing in stock markets. Educating people about why should we invest in stock market is one way we can rectify this.
Numbers don’t lie. In the middle of the Covid-19 scare last year, most Indians decided to park their money in fixed deposits with more than 6 lakh crore new FD accounts opened in Q1 2020, according to a report from The Times of India. This indicates the basic money attitude of Indians – we like to save, not invest. They think - why should I invest in stock markets when banks give me steady returns?
However, there is no reward without risk. There is risk associated with investing in stock markets, but if you do it with proper research and understanding, there is a higher chance for you to reap profits that will be far higher than a 5% interest your bank can give you per annum.
For instance, the Nifty metal index, an index that tracks the performance of top metal companies in India, has risen more than 100% in one year till November 17th, 2021. That means, if you had invested your money in this index on November 17th, 2020, your money would have doubled by now. Of course, there is no way one can predict with surety that this will happen but if you understand enough about the market, you will be able to predict some of the rises and it could grow your money immensely compared to an FD account.
India has the largest amount of privately held gold among all countries in the world. This could be because gold gives you a physical receipt of the money you spent, unlike a stock market. Buying gold is also closely related to our culture and we have even special days related to buying gold. It’s beyond doubt that Gold is where most of Indian’s investment goes. Since gold is closely related to the varied cultures of India, we have developed a trust in it. But if you, again, look at numbers, we can see that the investment is not that rewarding nowadays. Gold prices have dipped about 3% in the last year, according to the price on November 17th, 2021. At the same time, Nifty has gained about 40% during the same time period. In simple terms, if you have invested Rs.1 lakh in gold on November 17th, 2020, you would have lost Rs.3000 by now. At the same time, if you had invested in Nifty in the same time period, you would have made a profit of Rs. 40,000.
The lack of knowledge about the opportunities of stock markets directly leads to a lack of trust. People will find it hard to trust something that they don’t fully understand. At the same time, people will take into account the stories of scams and that could also scare them off.
This is another by-product of a lack of knowledge about the stock markets. Most people hear success stories about the giants of the Indian stock market and think they need a huge amount of money to start investing in stock markets. But this is absolutely wrong. You just start with an amount as low as Rs. 500.
Creating awareness about the workings of stock market investments is the key to rectifying most of the above problems. Now, let’s see some reasons why you should invest in stock markets.
India’s see retail inflation of about 5% on average yearly. That means, your money has 5% less purchasing power now compared to a year before. Stock markets allow you to beat this inflation and grow your money. As said above, Nifty has grown more than 40% in the last year alone, which is clearly indicative of that fact.
Whatever your full-time job is, investing in stock markets could be a really profitable side-hustle. All it requires is proper understanding and research about stock markets.
Gone are the days of dozens of paperwork- you can invest in stocks in just a few clicks now! While the exact chronology may vary, here are the common steps:
Yes, it’s as easy as that!
There is no better time to invest in stocks than now. If you are someone who wants to invest in stocks but is reluctant due to any reason, worry not – investing in stocks is a time-tested and proven investment method. If you need guidance, you can always take the help of a financial advisor as well. Don’t wait too long, the opportunity won’t wait! Happy investing!
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