There is a general Idea that people loose all their money in Stock Market. Some come to roads after losing all their money. This Idea is so firm that they will not even rethink. They will give examples of people like a relative of his friend went bankrupt after investing in stocks etc.They will give examples of stocks such as Satyam computers and Kingfisher airline.They will talk about stock market crashes and depressions .There is a panic associated with the stock market and it is very deep.
They like safer investments which give the little return. In return, they suffer. Their money is safe in the banks and fixed deposits but they are stagnant money. That money does not increase with time.They only get fixed interest rate. That money does not work for them. They only work for the money for their entire life. This lead to a financially challenged situation. They are not able to be at par with the inflation. They are not able to reach their financial goals.
While this is true that some amount of money should be kept in the form of cash equivalents but most of the money should be invested.Investing is an art. Benjamin Graham says that investment should always safeguard the principal amount.So risking the principal amount cannot be considered as an investment.
Diversification is the tool to survive in the financial markets.While big investors believe in putting all eggs in one nest as they know how to control that nest.For a newbie or for those who does not have time to spend on research in the markets, it is always advisable to diversify.Buying mutual funds can be considered safer for them.They can rely on the fund manager.
But in India, the feeling of losing money in stock market is so intense that they will like to stay away. I had shown the Sensex chart to many and how many times it went up. But they will talk about the market crash , recessions.But true investors do not fear about a market crash.They take it as a buying opportunity. Investing is an art in which you are required to act opposite to the crowd. If everyone is selling then you should be buying. If everyone is very optimistic and buying, then probably it is time to sell and book profits.
Benjamin Graham says to invest in stocks and bonds. The ratio between the two investments should be controlled according to the market conditions. Investing money in the markets will ensure that you keep up with inflation and is able to reach your financial goals.If you are young then you should invest in the financial markets aggressively.Based on your age the investment activity will depend on .While the person who is close to retirement should tak the only conservative approach to investing.Young people should take bigger risks.
While in financial markets, there are two types of activities which can be carried out which are trading and investing . While the former can be carried out successfully but there are conditions which should be considered before trading. Trading should be learned first. It does not insure the principal capital. The art and psychology required to trade should be learned first. If you don’t have time to learn this activity then it is advisable to stay away. Losses can huge if it is done without any knowledge. Investing in the markets should be ideal for you if you don’t have time.
Learning how to invest can be very fruitful.If you are skilled in finding undervalued stocks then you can get filthy rich. Going big on a single stock can change your life. Even a one lakh investment can be crores.This is the arena of Multi-bagger stocks.If your money doubles then it can be considered one bag.If your money multiplies 10 times then it can be said to be 10 baggers.Big investors made their money by means of multi-bagger stocks in their portfolio.
Finding a multi-bagger is very tough.This is not a cup of tea for everyone but the rewards are too good and are worth to take the burden.
In conclusion what can be said is staying away from the financial market will be too much conservative. Reading and investing in the markets should be a good approach and the rewards can be humongous. Your efforts will be rewarded in this area like nowhere else.