Description
Making investmnet simpler
Let’s make investment simpler Lower retail participation has always been an issue, when it comes to investor participation in Indian Stock market. Less than 1% of India's population invests in equities and more so, less than 2% of household savings go in equities, where as in many developed and developing countries percentage is as high as 30 to 45%. The Indian retail investor saves over $300 billion but allocates less than 5 per cent to financial market instruments other than low return bank deposits and its less than 8% of the entire holdings in Indian stocks where as FII’s are on a very higher side. In countries like Taiwan retail holding is higher than the FII’s. Even in terms of geographical spread, more than 90 per cent of exchange trade is largely confined to 10 cities and 100 companies. The biggest reason for this lackluster allocation to capital markets remains lack of confidence and limited financial literacy. Stock markets are considered to be too complex for retail investors. Certainly it will be nerve breaking and complex for a short term investor but if one has a long term view, stock markets will be as easy as it is for the FII’s and HNI’s. Generally people enter stock market with a view to make quick money but they generally forget that it’s also the place where you can make quick losses. Trading in stock markets and investing in stock market are two separate entities, in terms of strategies used, patience and rationality. Investing is all about using one’s rationality while buying or selling, keeping a long term view, ignoring short term fluctuations. Trading is all about taking quick decisions, having a short tem view, moving with the market fluctuations. One need to be an expert and professional when it comes to trading, always needs to ride the information curve that moves the market and a slight miscalculation could cause a huge loss. So retail investors need to concentrate more in investing rather than trading in stock markets. Investing and trading in stock market is all about riding an information curve and one’s fate depends on at what point one enters the curve. The earlier we are part of the curve is the better. Stock markets are not as complicated as people think of. Certainly there are no sure shot methods to earn profit but there are sure shot methods to eliminate losses and these methods are not high science methods but general rules which one can find in any book on stock markets and these rules are also the most neglected ones. People in spite of knowing these facts commit same mistake time and again like going after hot stocks, flying news, hot tips etc. Once we make losses, we start blaming others (generally the Big B’s of share market); completely ignoring our own mistakes and starts thinking that stock markets are complex play ground. Now comes the big players like Mutual funds, ULIPs and other asset management institutions, they will confirm your negative belief by using your own mistakes as their advantage and convince you that you are not the right person but they are, to stay in the market. It’s as simple as you are with us or you are not there at all. Generally one finds too many fluctuations in near term in stock markets but if one carefully examines the long term trend, it will always be an upward moving positive curve.
The below graph shows the long term price appreciation as well various additional benefits like dividends and bonus over a long term horizon, on a Infosys share. Tread in clearly upwards and positive. Infosys Share price movement (Last 11 years) (D=Dividend issued) (B=Bonus Shares issues)
It’s important to note that all major adverse events like dot com bubble, Ketan Parekh scam, September 9/11, 2008 financial crisis, US sovereign debt crisis, EURO crisis, etc have all been factored in this graph and has been discounted. In long term there effects are almost minimal.
The below two graph shows the short term price movement of Infosys share. One can easily see the heavy fluctuations and volatility, with no clear trend where the share prices will head in the near future.
The graph below represents Infosys’s single day share price movement (05 th October, 2011)
The graph below represents Infosys’s three month share price movement (July, 2011 to October, 2011)
The above facts about investing in Infosys are true not only for Infosys but also for any stock, if investments are made with a long term view. Investors do long term investments through insurance, fixed deposits, post office deposits, mutual funds, national saving certificates. If one invests in stock markets with the same long term view, patience, rationality, perseverance, returns on investments will be many multiples of what any other alternative of investment can give. If one wants to invest in stock markets and still wants to be in safer side, one has option to invest in index stocks, blue chip stocks and the PSU stocks. Every one of us make mistakes, but it’s all about learning from our mistakes, not to repeat them again and to pass our learning’s from our mistakes to others, so that they don’t repeat the same mistake and keeping our basics right. This is applicable in all spheres of life and so is applicable in investing in stock markets also. It’s all about making life easier and making investment easier. We just need to have faith in ourselves and our skills and we can do wonders.
References: ?
?
? ?
MoneyControl.com Business-Standard.com IIM-C Google.co.in
doc_370800161.doc
Making investmnet simpler
Let’s make investment simpler Lower retail participation has always been an issue, when it comes to investor participation in Indian Stock market. Less than 1% of India's population invests in equities and more so, less than 2% of household savings go in equities, where as in many developed and developing countries percentage is as high as 30 to 45%. The Indian retail investor saves over $300 billion but allocates less than 5 per cent to financial market instruments other than low return bank deposits and its less than 8% of the entire holdings in Indian stocks where as FII’s are on a very higher side. In countries like Taiwan retail holding is higher than the FII’s. Even in terms of geographical spread, more than 90 per cent of exchange trade is largely confined to 10 cities and 100 companies. The biggest reason for this lackluster allocation to capital markets remains lack of confidence and limited financial literacy. Stock markets are considered to be too complex for retail investors. Certainly it will be nerve breaking and complex for a short term investor but if one has a long term view, stock markets will be as easy as it is for the FII’s and HNI’s. Generally people enter stock market with a view to make quick money but they generally forget that it’s also the place where you can make quick losses. Trading in stock markets and investing in stock market are two separate entities, in terms of strategies used, patience and rationality. Investing is all about using one’s rationality while buying or selling, keeping a long term view, ignoring short term fluctuations. Trading is all about taking quick decisions, having a short tem view, moving with the market fluctuations. One need to be an expert and professional when it comes to trading, always needs to ride the information curve that moves the market and a slight miscalculation could cause a huge loss. So retail investors need to concentrate more in investing rather than trading in stock markets. Investing and trading in stock market is all about riding an information curve and one’s fate depends on at what point one enters the curve. The earlier we are part of the curve is the better. Stock markets are not as complicated as people think of. Certainly there are no sure shot methods to earn profit but there are sure shot methods to eliminate losses and these methods are not high science methods but general rules which one can find in any book on stock markets and these rules are also the most neglected ones. People in spite of knowing these facts commit same mistake time and again like going after hot stocks, flying news, hot tips etc. Once we make losses, we start blaming others (generally the Big B’s of share market); completely ignoring our own mistakes and starts thinking that stock markets are complex play ground. Now comes the big players like Mutual funds, ULIPs and other asset management institutions, they will confirm your negative belief by using your own mistakes as their advantage and convince you that you are not the right person but they are, to stay in the market. It’s as simple as you are with us or you are not there at all. Generally one finds too many fluctuations in near term in stock markets but if one carefully examines the long term trend, it will always be an upward moving positive curve.
The below graph shows the long term price appreciation as well various additional benefits like dividends and bonus over a long term horizon, on a Infosys share. Tread in clearly upwards and positive. Infosys Share price movement (Last 11 years) (D=Dividend issued) (B=Bonus Shares issues)
It’s important to note that all major adverse events like dot com bubble, Ketan Parekh scam, September 9/11, 2008 financial crisis, US sovereign debt crisis, EURO crisis, etc have all been factored in this graph and has been discounted. In long term there effects are almost minimal.
The below two graph shows the short term price movement of Infosys share. One can easily see the heavy fluctuations and volatility, with no clear trend where the share prices will head in the near future.
The graph below represents Infosys’s single day share price movement (05 th October, 2011)
The graph below represents Infosys’s three month share price movement (July, 2011 to October, 2011)
The above facts about investing in Infosys are true not only for Infosys but also for any stock, if investments are made with a long term view. Investors do long term investments through insurance, fixed deposits, post office deposits, mutual funds, national saving certificates. If one invests in stock markets with the same long term view, patience, rationality, perseverance, returns on investments will be many multiples of what any other alternative of investment can give. If one wants to invest in stock markets and still wants to be in safer side, one has option to invest in index stocks, blue chip stocks and the PSU stocks. Every one of us make mistakes, but it’s all about learning from our mistakes, not to repeat them again and to pass our learning’s from our mistakes to others, so that they don’t repeat the same mistake and keeping our basics right. This is applicable in all spheres of life and so is applicable in investing in stock markets also. It’s all about making life easier and making investment easier. We just need to have faith in ourselves and our skills and we can do wonders.
References: ?
?
? ?
MoneyControl.com Business-Standard.com IIM-C Google.co.in
doc_370800161.doc