Myths About the Stock Market

Myths About the Stock Market

Stock Market Myth 1: Investing in Stock Market is Very Risky

Every investment comes with a risk. And stock market is no different. No doubt, short term investments in stock exchange can be precarious; there is also a 70% chance that you might end up losing all your money on capital, let alone the fact that you’ll have to pay taxes too. However, the catch is ‘Looking at the bigger picture’.
 
There is a thought-provoking concept that comes into play here: ‘Long term capital gain’. It means that you have to hold your shares (bought in any given company) for a minimum of one year before you sell them out. Fun fact: It is tax free (up to a stipulated ceiling limit, which is Rs. 1,00,000 today) 
 
More intrinsically, there are heavy ups and downs in sensex on a day to day basis. But, it proves to be quite beneficial in the longer run. 
 
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Stock Market Myth 2: You need to have a very strong knowledge about finance

Ironically, all you need to have is ‘Common sense’. Having a background in finance is undeniably an icing on the cake, but not quintessential at all. 
 
One amongst the top 10 richest people in India, founder of mega-retail chain stores D-Mart and a college dropout: Mr. Radhakrishnan Damani, is considered to be the GURU of the king of stock market, Rakesh Jhunjhunwala (A Chartered Accountant). 
 
Analysing the patterns of annual turnover, profit margins, the yearly change in the value of share price of a company, etc. over a span of 3-4 years can provide a lot of insight into the company’s business, thus giving you the leverage of investing wisely. And it doesn’t take a Financial Analyst to do that!
 
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Stock Market Myth 3: Small investors cannot benefit from stock market. You need loads of money to invest in stock market.

I came across a very pithy expression the other day: ‘You don’t need to be the Wolf of the Wall street to start investing. It’s utterly okay if you are just a Mouse of the Main Street.’
 
Clearly, change doesn’t happen overnight. We can’t invest 300 Rupees, possibly expecting it to double overnight. But we can start with 300 Rupees and habituate ourselves to invest regularly, until we meet our goal. 
 
Managing funds can be a lot simpler if we adhere to a methodological approach; starting with setting a deadline for our funds to yield. By this, we will be able to set a budget for our investment and gauge our financial planning well in advance. Another way to capitalize safely would be to diversify our investments, so that we don’t end up losing everything at once. 
 
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Caution: Stock market is all about predicting the unpredictable. So, as fundamental as my knowledge is, and as a novice, I also think that you can’t rely on these values completely; there are a lot of other factors that come into play, but this can surely help you comprehend the bigger picture. Point being, with all the necessary knowledge and precaution, stock market can improve our financial stability in the future. 

Ananya Sheth

Author

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