Indians consider the stock market as a considerably riskier avenue of investment. According to research, only 3% of Indians invest in equities as compared to 55% in the US and 12.7% in China. This can primarily be attributed to the fact that equity investments, when compared to other asset classes, are more volatile and carry a greater level of risk. Some of the other reasons are listed below:
- Lack of market knowledge/expertise
Investors avoid the stock market because they have little or no knowledge of it. However, increasingly now, there are several helpful resources online, including financial publications and personal finance platforms where individuals can gain the necessary knowledge to begin investing.
- Investment myths
There have been numerous investment myths going around for a long time. For instance, one needs to be extremely intelligent or lucky to succeed with stocks, or one cannot invest with their judgement. These are myths, and the truth is, anyone can invest in stock markets.
- Lack of funds
Investors frequently keep themselves away from the stock market due to a lack of funds. It is a prevalent misconception that investing in stocks requires a large sum of money. However, if you conduct your research and then buy into a company, you can start with an amount as little as Rs. 100.
- No adequate support
There were no formal certifications or educational venues to get oneself acquainted with the stock market. Today, with so many online courses available, this challenge too can be overcome. There is also the alternative of consulting a financial expert if one does not have the time to equip themselves with all the required knowledge.
- Lack of patience
Most people feel that it is a place where they can make quick money. Investors who lack patience are more likely to initiate or exit a trade at the wrong time. Such hasty decisions usually work against them. As the adage goes, it’s the time in the market that pays and not ‘timing the market’.
- Investing the conventional way
Traditional assets such as bank fixed deposits and gold, when compared to stock markets, provide guaranteed returns, in the long term. People do not have the time to research a stock and make appropriate investments.
- Prior experience
Previous experiences of loss in the stock market hinder future investments. Suppose an investor in the past lost money in the stock market due to bad investments, they are likely to avoid future investments. Rather than investigating the reasons for failure, the investor will prefer to stay away and make other investments.
- Lack of risk appetite or risk tolerance
Indians are essentially a close-knit society, where many family members depend on a single earning member. This impacts an investor’s risk appetite and tolerance, and they may not want to put their earnings into instruments where capital appreciation is not guaranteed.
- Financial security of investments
Due to scams, people are dissuaded by stock markets and remain wary of market investments. However, the Securities and Exchange Board of India (SEBI) has emerged as a strong market regulator, and scams have been brought under control.
There is a significant gap between Indian stock markets and Indian investors today due to the reasons mentioned above. However, with the right resources, and some patience, anyone can find investing in stock markets fruitful. In fact, the country has been seeing a shift lately. As per SBI’s recent report, ‘‘The number of individual investors in the market has increased by a whopping 142 lakh in FY21.’’ The percentage of population investing in stock market in India is rising. And with the right guidance, you too can be one of them and tap into the stock market’s vast potential.