Why people are afraid of Stock Market ?
You are afraid of stock market may be due to losing money, unknown fear, too much work, commitment, pending loans, uncertainty. People are afraid of so many things in life and even the person who has six-packs will be afraid of losing money.
When you are investing your money, the general requirement with many of you may be,
Categorise your money requirement in these sections,
1 – Money needed for the next 6 months
2 – Money needed within next 2 years
3 – Money needed within the next 5 years
4 – Money for long term goals beyond 5 years
Liquidity may be the factor that needs to be analysed in depth. If you don’t have any amount to rely upon during emergency, then it is wise to look at having six months of monthly expense as an emergency fund in a savings account. Liquidity should be the primary objective in this scenario.
Once the condition improves, you can look at investing based on when you need that money. Now refer to the money categorisation section, identify the liquidity factor now.
Money siphoning occurs mostly were there is no regulation. Unregulated chit funds, Marketing meetings which offer huge returns without major investment, etc.
Mutual funds offer an easy way to invest and offer a wide range to choose based on the money categorisation section. This is highly regulated.
Share market is also highly regulated and most of the frauds happen when you chose to invest in unknown companies. In your own home, you can find many companies which are listed in the stock market. Safety is an issue in real estate at a much bigger level.
We can save only public and private sector banks as the place where money safety is insured up to 1 lakh. In the recent budget this was increased upto 5 Lakhs.
Focus on returns took centre stage as the inflation fell to decades low. This resulted in the reduction of interest rates to single digits.
Return from an investment increases with an increase in risk-taking capabilities. Risk reduces with an increase in timeline. It has been proved with equity mutual funds.
Shares have rewarded investors with huge returns over a long period of time.
Primary Reason for being afraid of Stock market :
People are afraid by 2 reasons in stock market and I call it as 2F,
Finding a stock
Following it up
Finding a stock ;
Finding a stock is the first hiccup. People think i can’t find a stock and how money will be safe. As we had seen about safety and returns along with liquidity in the previous section, now it is all about finding a stock.
Are you living at home?
Do you travel to work?
If your answer is YES to any of the above questions, then get ready to find a stock.
Prepare yourself a table as below,
Now just look around the room.
What is the paint used in your home?
-Tea or coffee brand you drink?
-Car or bike you drive?
-Biscuits or snacks you have?
-Footwear brand you use?
-Soap & washing powder brand you use?
-Mixie or grinder or cookware or gas stove you use at home?
-Dress brand you wear?
Now find out the listed stock name and fill up the sheet. You can easily have a minimum of 5 stocks out of this list.
You need to travel for anything on a daily basis. On the way to travel,
Where do you add petrol or diesel?
-bank you do the transactions?
-IT companies you know?
-company which lays highways across cities in India?
– Dairy brand you are using?
– Where did you get housing finance?
-Insurance you took for your car or life or health etc?
Now find out the listed stock name and fill up the sheet. You can easily have a minimum of 5-10 stocks out of this list.
Now it is easier to track down the number of known stocks to 10-20. Another advantage of this is that all these are known stocks which are in the industry for a very long time.
Why people are afraid of stock market ?
The biggest fear after investing in the stock market is monitoring or following the stocks.
All the listed companies which you chosen are there in the market for a long time. Also, they are very old companies. Maruti, HDFC, SBI, HUL, ITC, Bata, Asian paints, Cipla, etc are there in the market for a very long time. All these companies exist with great corporate governance.
The only things you need to do is monitor quarterly results and next one year’s projections. You can also monitor those via certain stock market apps or websites.
Provide a sufficient time period in the stock market so that it creates wealth for you. Remember the quote of Warren Buffet,
“Rule No 1: Don’t lose money in the stock market
Rule no 2: Never forget Rule no 1”
You can follow this rule easily once you clear your 2F.
Are you still afraid of the stock market now? If so start again from the start of the blog.
More recent example is the erosion of market value due to corona virus spread across the world.