Stock Market is either the most favorite or most hated entity purely based on their conditions. Due to the misconceptions about up and down scenarios in the stock market, many people stay away from the market. They, instead search for alternative sources of investment which are less risky. But stocks provide higher returns than the avenue of fixed income saving. Sometimes they even force the economy to beat inflation and vice versa. However, we often hear about many people who lost everything in stock market.
Stock market…An overview to know about at a Glance
Indian stock market is the second only to the US. It consists of one of the largest universes of stocks in the world in which there are 5500 listed companies & having 150 stocks the market capitalization of which is more than $1 billion. For example consider the market capitalization of TCS, INFOSYS, RELIANCE, ONGC, etc. Indian stock market offers excellent exposure to various sectors from manufacturing to service and from banking to automotive. At the same time, investors are given many opportunities for stock picking. A large portion of the shares are held by the promoters and family entrepreneurs like Reliance, Godrej, Adani, Hindujas etc. So it leads small investors to question the rights of minority shareholders. And the market is significantly affected by Foreign Institutional Investors.
A rising market can be compared to the mentality of a herd. If the index goes up continuously for some days then there will be a sudden spurt in buying. On the other hand, it falls suddenly then calls from brokers are avoided which means investors are not willing to buy. This results in a drastic fall in buying that affects the index significantly. But if markets are in between a range that can’t indicate the rise or fall then it is limited to general update on markets and not on transactions.
Investors start to buy when markets are highly expected to increase further & they choose to sell when markets drop expecting it to fall further. Many believe that Stock Markets is a place for speculation, which I think true to some extent only. You may consider stocks as an investment or a lottery jackpot. But it’s true that one can earn better in long-term holdings. Many people seek advice from brokers & advisors. It’s always better to follow the suggestions of registered brokers if you lack the ability to manage your portfolio on your own. But mostly they advise from short term point of view.
Most of the wealth lost in the share market is due to greed. Similarly, investors afraid of booking losses. With too much greed one may wait for much longer even he can book profits in current conditions. Ultimately it may result in a considerable loss. So investing and managing your own portfolio either on own or through advisories is a serious thing. I believe that one can earn above average earnings by holding investments for longer-term. And what’s really required is commonsense. Finally, I can say that if you are able to add your emotional intelligence to investing activities then you can certainly do well.