Yes it is complex for an uneducated person or even an educated person to understand the financial market of our nation. Have you ever felt about it ? It is mainly because of the so-called market experts and other trainees who are making the market complex with the intention of reaping more money from the inattentive community. So throughout this article there will not be any complex terms making sure everyone who reads this can grab every knowledge without getting confused or mislead by any jargons. Just because the stock market offers the most fruitful investment opportunity to become financially free. Over 90% of our population depends on a single income and live their life to the fullest struggling for money. Being an intelligent stock market participant enables yourself the skills of managing personal finance, making intelligent investments for the future. Apart from all that the financial market helps to achieve financial freedom and that enables us to pursue our life goal without getting struggled by the 9-5 job and over dependence on salary.
The most successful investor of India Mr ‘Rakesh Jhunjhunwala’ describes that markets are like women, it is beautiful but unpredictable. The more beauty behind stock market is that everyone can invest just using your mobile phone with a de-mat account by sitting in your home. You are out of your 9-5 jobs and you are your own boss in the markets.
Interesting Thing About Stock Market
Market has an interesting character of repeating the history. The most beautiful mystery behind markets are bound to respect how it performed in history and that’s how markets are analyzed. So I believe that you are all eager to learn and explore the complexities of market in the most simplified way in our universe .
Why People Lose Money In Stock Market ?
As per the latest data 99 % of the stock market participants loses money . Sounds interesting right , only reason behind it is that people want to become rich overnight without investing time to learn , analyze and experience in financial market . So while you reading this and you are having these type of perspective then I would like you to make an instant transition that ‘ Learn first, then the market will reward you forever .
When it comes to stock market investment mostly what we hear about are the lost stories and a few legendary success stories. When we hear about the success stories like success story of Mr Rakesh Jhunjhunwala or Porinju veliyath they have reaped billions from the stock market and when it comes to common people like us all we have is a lost story and ends up blaming the market. So lets understand why common people cannot generate good returns from market and what all prominent factors to keep in mind before investing into any asset class.
Lack of investment knowledge – the one major reason why investors are making losses in the stock market is that they don’t have proper knowledge about the asset class they are investing in. New investors are seen following the holdings of top investors without knowing the price they have bought the stock. It is very necessary to do proper research, fundamental and technical analysis of a stock before putting hard earned money into that particular stock. Patience is also a key factor of successful investment. Investors has to wait to become the stock price undervalued and to buy at a right valuation.
Greed – investors come into expectation of making huge returns from market. Let’s understand how investors greed works with a real life example. As investments and trading is now in the spotlight one of my friend has opened a Demat account and added funds worth 10,000. His expected return was to make his capital 1,00,000 in a year. A return expectation of 1000%. We live in a world where a legendary investor Mr Rakesh Jhunjhunwala claims thatif anyone make 21 % from market he is an emperor and bank F D returns are about 7% and new investors expects 1000% return from stock market. In case of every investment setting up a financial goal and calculated risk reward ratio is very prominent.
Lack of proper Study and Research – New investors are not patient enough to put in the efforts to conduct in-depth research and study about an asset class before investing.Detailed fundamental analysis and technical analysis is very prominent in case of any asset class to understand the fundamental’s and valuation of a stock. Legendary investor Warren Buffet reads and study one annual report of a company every day this helps him become one of the most successful investor in the world. Fundamental analysis of a company helps to understand the valuation of a company , profitability and debt conditions. Technical analysis helps to find the best price to buy and sell a stock. In-depth study and analysis of stock and well diversification is key strategy that the successful investors are using to generate wealth. Investing is not an easy task but the right efforts and proper investment knowledge can definitely reward in long term.
Lack of diversification and risk management – A common reason why investors lose money in the stock market is investing all hard earned money into a single stock or asset class in expectation of huge returns. If the market of stock moves against their expectation investors has no idea about risk management and ends up creating huge losses. Now a days with the revolution of discount brokers even trading in derivative segment is also easily accessible to new investors. Trading in derivative segment carrier more risks than equity market and new investors are advised to stay away until they gather relevant market knowledge and experience. Risk management is the prominent strategy used by experienced investors and traders to avoid bearing huge losses. Investors must know and take only calculated risk they can afford to prevent huge losses and can end up profitable in the long term. Position sizing and risk management is the magical tools used to prevent huge losses from the market. As an informed and intelligent investor having a well calculated risk to reward ratio is very prominent.