Do you know that whooping 95% of Indian families prefer investing in bank FD? As per a survey by Securities and Exchange Board of India (SEBI), Indians park their money in fixed deposits as they are non-market linked instruments and give a risk-free fixed rate of return. Although the main reason perceived is security of money. As there has been a lot of awareness for investing money in mutual funds and stock markets, people have realised that FD returns do not even beat inflation. For a person who is unaware of the fact, let’s see the inflation-adjusted returns that FDs provides, as well as explore some other options of investment.
Inflation ranges around 5% to 7% in India. The return on fixed deposit is about 6.5%. Keeping the rate of inflation as 6%, FDs give only 0.5% returns. Another safe option where most of Indian households put their money in is Gold. Gold gives a Compounded Annual Growth Return (CAGR) of 9%. Gold’s inflation-adjusted return would be only 4%. Similarly, Real Estate gives a CAGR return of 14%. So, the inflation-adjusted return of Real Estate would be 9%. This is comparatively better. Now, let’s have a look at the stock markets. The CAGR return for stock markets is about 17% and the inflation-adjusted return for stock markets would be 12%. Stock markets provide the best returns over one’s investments.
With high returns comes high risk. But this risk can be very well managed if one invests with the right knowledge, skill, and psychology. Especially if one is young and has the capacity to take risk, they must invest majority of their savings in stock market investments. Suppose a person starts investing in their early 20’s. By their retirement, they would have converted their investments into wealth. The effect of compounding would have worked and instead of working for money, the person would have earned money by letting the money work for them.
Let’s understand it clearly with the help of a calculation. A person invests Rs. 10,000 in the beginning in stock markets. Then continues a regular SIP of Rs. 500 per month (which amounts to Rs.6000 in a year). This is done regularly for 40 years. The total amount invested in 40 years would be Rs. 2,50,000. Keeping the CAGR one gets from stock markets 17%, the compounded return of investment would be Rs. 3,87,36,977. Isn’t that insane? That’s the true power of compounding.
Hence, investing in stock markets reaps exceptionally high returns over a longer horizon. But, how to learn the skills required for investing and trading in stock markets? How to begin investing? Here are 4 steps to be followed to start investing yourself–
1- OBSERVE –
Observe the past market data of at least 6-8 months. Track market indices movements, specific stock movements and try to understand the reason behind large fluctuations. Also track news related to Indian companies, global cues, and other stock market related news. Find out the key parameters which big investors use for analysis of the stocks to make investments.
2- RESEARCH –
Slowly and slowly, start looking for good companies, research about their fundamentals like shareholding pattern, market share, financials, capital allocation and management’s quality.
Start making decisions but remember to stick to what you have learnt and gained through knowledge. Keep your risk appetite in mind and go with only that money which you are comfortable in losing. Even if you lose it all, it should not affect your financial or emotional well-being.
4- TAKE UP A GOOD STOCK MARKET COURSE
Now, the most common problem that most people face after these three steps is whether what they have learnt is correct or not. They are unable to bring conviction and confidence in their trades and investments. Even if they have acquired some skill and knowledge to begin, they lack the emotional discipline to trade or invest in the markets.
The solution to all these problems is to enrol in a good stock market course to understand the basics to advance of stock markets in a clearer way and gain that temperament and confidence to trade or invest. Taking up a good stock market course is very necessary as it helps to build strong foundation, save time, act, and develop the right mindset and attitude. All these things are very necessary to stay in the markets. Good stock market courses do not only increase a person’s knowledge and lets them start their profitable journey in stock market but guides them throughout their journey. This way people understand the importance of key concepts and can manage your risk and reward properly and fearlessly.
This is one of the best stock market courses online for commerce students – ISMA 2.0 (Irresistible Stock Market Architecture Program). ISMA 2.0 is a comprehensive mentorship and training program in stock markets for Portfolio management, Technical and Fundamental analysis, Derivatives, Psychology, and Behavioural finance.
What will ISMA 2.0 provide?
• Understanding of the wealth formula deeply
• Setting financial goals for oneself
• Learn how to manage money and fulfil dreams
• Learn how to develop an investor mindset and improve current financial situation
• Access to a successful system for selection of quality stocks
• Access to a successful system to take trades keeping the odds against one’s favour and maintaining a proper risk to reward ratio for enhanced profitability and reduced risk.
• Performance analysis