Why equity is untouched by common people in India?

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Equity is the most beautiful thing in the financial world

If your father thinks that the best place to park the little savings he accumulated from the fund credited to his salary account is bank fixed/recurring deposit, PPF or post office saving account then we have something to blow your mind today.

It has been more 150 years since an organised form of stock trading started when East India Company stepped on our sub-continent and today we stand in the 21st century wherein even a samosa seller receives money from customers via PayTM. Since inception, Indian Stock market has witnessed an unbound growth which had cut across the market capitalisation mark of 125 crores in December 2017.

The BSE has surpassed the market capitalisation of 125 crores despite the fact that only 1.3% of the Indian population invests in the stock market.

It is not uncommon to hear from well-educated people various ‘misconceptions’ revolving around putting money into equity. Generally, they come up with words like:

  • “You need luck as it’s complete gambling or else you’d lose all money”
  • “It’s too dangerous and I know it’s rigged like a boxing game”
  • “You need a lot of money to enter in order to cover any incidental market crash”
  • “Don’t know how to learn fundamental and technical analysis”
  • “De-mat account is a savings account?”

Needless to say, there are much more ‘misconceptions’ about stocks and equity of this well-educated-financially-illiterate club.

Let’s talk with some statistical figures to know why we should create wealth from equity:

  • The Sensex closed calendar 2001 at 3,262 and soared to hit 34056.83 on the last trading day of 2017 which translates into an approximate figure of 15% p.a. return. The best part is all of it is tax-free.

    The best return has been delivered by equity. Neither bank FDs, nor any other investment instrument in the market.
  • Imagine, putting money into convention bank FDs or post office saving account which fetches a return of around 8% p.a., this return attracts tax. Post-tax return makes it around 5-6% considering one comes into the highest tax bracket of 30%. Don’t you find it illogical to invest in a 5-6% net return when inflation was already soaring at 5.07% in the January of 2018?
  • In a population of 134 crore Indians, less than 2% of people invest in the stock market.
  • Stocks like Symphony gave 250,000% return in 16 years and Eicher Motors Ltd has rolled 140,000% return in 17 years, clearly proving that equity is the ‘best fastest wealth builder’ in the world.
  • Investors like Rakesh Jhunjhunwala started with a meagre amount of 5000 in stocks and now stand as the 53rd richest person on Forbes 2016 list.

Getting acquainted with equity is easy. With a little effort and discipline, anyone who really wants to learn can. If trading doesn’t suit a person, he can resort to investing ranging from 3 months to 30 years. But, to book profit some psychological points must be kept in mind:

  • Master emotional control and discipline
  • Create a structure and strategy
  • Do not break or rearrange your plan, no matter what
  • Cut losses as early as possible

If you don’t find equity a ‘beautiful thing’, you may start with Mutual Fund. Your money would go into equity indirectly from Mutual Fund but through an expert of the financial market. Yet, you must kick-start investment as early as possible.

You have got both the choices- either take no risk and get an almost negligible return or play hard and take home hefty profits. We’ll always advocate the latter in the long run.

Anyone can start his investment in the stock market, anytime. So, convince your father today to stop making fixed deposits and start playing with the market’s most beautiful thing, which is equity.