Do you accidentally switch to NDTV Profit on your TV and see all those charts in green and red? There are some people talking absolute gibberish and you think, “thank god I am not a part of this madness“. Well, I do not question your mindset as I used to be on the same page, not so long ago. As a matter of fact, I recently covered the reasons you shouldn’t be taking part in stock markets. However, if you relate more to the active investing fraternity and are at a tipping point weather to jump in or not, this post might help.
Conventionally, our parents and grandparents would often be found to criticize stock markets. I don’t blame them for that. They have lived through the times of Harshad Mehta. A time, where information wasn’t as abundant as it is today. So all they associate stock markets is with fraud and treachery. Despite that, should you go ahead and prove to be rebel? Where did all that spirit of learning from other’s mistake go? Let’s understand why should one invest in stock market?
1. IPO Frenzy:
IPO or initial public offering is when a non publicly traded company plans to get listed on the stock market. Until you live under the rock, you must be aware that recently Airbnb, Ant Financial came up with their IPOs. Recently Indian Stock Markets have also welcomed many such companies e.g. Burger King, Antony Waste Management Company, Mazagon Dock, Happiest Minds to name a few. Except for UTI AMC, most of these companies were listed at a premium of 70-80%. As an example, 1 lot of ‘happiest minds’ an IT company, costed about ~15000 and you could sell it in 31650 (111% listing gain) within 7 days of purchase. That is textbook definition of easy money.
It would be totally fine if you never plan to invest a dime in the stock market. But, you should always look forward to capitalize on decent IPO opportunities. I personally got an IPO of Mazagon Dock and made a staggering 92% return in a week. Isn’t that awesome?
2. Learning Opportunity:
Do it just for the sake of learning. It is absolutely okay if you don’t want to be a part of this noise. But, stock markets tends to teach you a lot. You will learn how to analyze a business, some basics of economics and reading of candlestick charts and much more. And even after plethora of learning, if you still plan to stay out of stocks, at least you would be able to have an intellectual dining table conversation with your peers.
I use Zerodha as my stock broker. As soon as you open an account with them, you get a free access to app called Varsity which would teach you about all these topics using very intuitive snippets. I may not be an avid trader, but I definitely sound less dumber when I talk to my friends now.
3. Investing Vs Trading
As mentioned in the introduction paragraph, our parents always assume that stock markets are worst place to be in. They are absolutely risky and you are bound to lose money. What they don’t know OR tell you is that they often refer to the trading aspect of equity markets. While trading as well, is a livelihood for many people, but you can stick to long term investing if needed. If you plan to be a value investor and pick companies/businesses that you are aware of, there is no need to be afraid. For example, I have worked for Vodafone in the past. I know telecom business pretty well. So it would be easy for me to evaluate the current situation of VI, Airtel and Jio (Reliance). Therefore, I pick wisely and invest in the business of my choice.
One can start any business he/she well acquainted with. As a matter of fact, as you go, you learn about business models of different industries too.
4. No Minimum Amount and Flexibility:
If you want to start small but still want to make some decent returns, stock markets are a good alternative. It totally depends on the cost of the stock you plan to go for. As an example, stock of VI is currently trading at Rs. 10.3 and stock of MRF is trading at Rs. 75,500. Both the ends of spectrum are available and it is up to you to decide and pick the best company(s) amongst them.
Apart from that, you enjoy a complete flexibility in terms of investing frequency. You may invest more if you have got a bonus etc. You may choose to skip a particular month in case of a crunch. Stocks are highly liquid and there is no lock in period either. You can sell stocks any time you want. (Don’t forget the taxation while you do so)
5. Gateway Medium for further Investments:
You may have started the equity journey with the equity mutual fund route to expose yourself to the markets. I did exactly the same. However, after gaining some insights of how equity markets work and stocks operate, I think I am better equipped to take a call on the mutual funds. In other words, Equity markets are a gateway to your other investments. Once you get a hand of stock markets, you tend to explore more related avenues offering higher returns as compared to conventional instruments like FD.
You know what’s the best part about risk? It isn’t risky when you know what you’re doing. That is what a calculated risk is all about. Moreover, if someone comes up to me and offers a return much higher than inflation, FDs and other government schemes, I am willing to take a decent risk. Investment is all about risk to reward ratio. So for me, if someone asks should I invest in stock market? I am going with a yes. What are your thoughts about investing in equity stock market? Let me know in the comments section below or you can hit me up on Facebook, Twitter or Instagram. If you find this article useful, please consider sharing it on social media using the links below.
Until next time. . .