Stock Market

‘Market’ the commonly used term for the country’s 2 biggest stock markets are a common point for buyers and sellers of shares. Like other physical commodities that were traded in local markets, shares too first existed in physical (paper) form. There were stock markets in almost all major cities of India, where share brokers acted as buying or selling agents on behalf of the customer and physically met to trade.

Technology changed the way we live, and these markets were no exception. From trading floors where brokers screamed out share prices like the local subzi mandi, our markets changed to sophisticated technological zones where brokers operated on slick terminals. Most brokers now don’t even need to visit the exchange since they operate on behalf of their clients from their offices.

Equity investments offer a great opportunity to investors, but only if done with a considerable amount of care. As novices we often make the mistake of trailing the markets, i.e. when we see that a particular stock has performed well, we tend to put in our money into it, often after it has already made gains. As a result, by the time we invest, many others may already be booking profit as a result of which the stock price may see correction. So as a beginner if you look at investing in the share market here’s a list of things you must look at:

  1. Overall performance and outlook of the sector – ensure you understand the industry
  2. Start with a small amount or a small portfolio –
  3. Despite a small investment, try and diversify as far as possible
  4. Avoid the herd mentality – don’t necessarily put in money into a stock many others may have bought
  5. Never be emotionally attached to a stock
  6. Don’t be greedy, when you have made a good amount on a particular stock, please exit.
  7. Monitor on a regular basis.

Stock markets offer great investment opportunities, but only if we are smart investors. If you are looking to become a first time equity investor or wish to discuss your existing investments, get in touch with our team of experts.

Equity not risky in long run

Rolling Return Growth
1 year 3 year 5 year 7 year 10 year 12 year 15 year
Probability of loss in sensex(%) 37.04% 20.00% 13.04% 14.29% 5.56% 0.00% 0.00%
Probability of loss in selected equity funds 27.33% 17.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Equity — a long-term wealth creation asset
Start investing Rs. 1000 & Rs. 1500 respectively every year till the age of 50. Both would have invested the same amount of Rs.30000. However, assuming a 10% return on investments, Ajay would have accumulated around Rs.181, 000 while Vijay would have accumulated only Rs. 95,000, nearly half the amount accumulated by Ajay. The magic of compounding works here. Vijay would have to invest Rs. 2850 p.a., 2.8 times that of Ajay, to get Rs.180, 000 at the age of 50.
Equities have the potential to deliver higher return as compared to any other asset class. An analysis of the long term performance of Indian equities shows that the BSE Sensex has delivered a return of over 14% (CAGR – as on 31st December 2013) over the last 10 years. Further, analysis of the 10 year equity CAGR, since 1990, shows that the return has been always positive. The average 10 year CAGR for the period 1990 to 2013 is around 17%. Following a long-term disciplined investment approach and remaining invested in equities even in uncertain times will ensure that investors reap the benefit from their financial investments.
The equity markets have significantly rallied recently and we strongly advise our policy holders to continue their investment in equity, as equity investments work best if held for the long term.
The key to wealth creation is to invest regularly over long term. The longer you stay invested, better the effect of compounding. To illustrate, consider two individuals, Ajay (20 years old) and Vijay (30 years old),

New Investors Are Entering Stock market