After hearing the story of some Indian investors, today many people are ready to invest in the stock market. While awareness about the Indian stock markets has increased, there are still investors who lack the knowledge to handle the volatility associated with this financial instrument. Many of these investors also see the stock market as a ‘get rich quick’ scheme, while for others, it is a place to make profits when the stock rises, that is, to perform well. That’s it.
But there is more to the stock markets than just moving up and down in stock prices. Indian stock markets have recently become quite accessible to the common investors as well and it offers some amazing benefits and opportunities to the latter. In short, Indian stock markets can help individuals and small investors to build wealth.
Here are some reasons why investors should invest in the stock markets:
start with a small amount
To start a small business, an entrepreneur has to invest a substantial amount at a time and there is a lot of risk involved. However, when you buy a stake in a business listed on the stock exchanges, the risk involved is comparatively minimal. That is, investors can start with a small amount and buy some shares. Over time, you can invest more and buy additional shares to increase your stake in the company.
Today, technology has not only made online food ordering an easy task, but has also made placing orders to buy and sell stocks a seamless process. Investors can buy and sell stocks online with just one click on their mobile phone, thus reducing investor effort.
For example, when you place an order to buy a stock, as soon as the stock reaches the target price, the order amount is debited from your account as well as the stock is credited to your account. Similarly, when you place an order to sell shares, the shares are debited from your account when they reach the target price and the amount is credited to your account within 2-3 days. Thus, making stocks a very liquid investment instrument.
get a share in a profitable business
When you buy stock in a company, you are buying a stake in an existing business, which has a huge advantage. The main advantage is that since these businesses already have an infrastructure and are already running, one can earn from the future profits of the said businesses without being involved in its operations.
Another advantage is dividends. Every year, listed companies share the fruits of their efforts with investors in the form of dividends. These dividends can be given to you in the form of additional shares or as a fixed amount per share. For example, if the business you invest in declares dividend at Rs. 10 per share and if you have 1,000 such shares, you will get Rs. 10,000 as dividend.
Investors have the ability and freedom to invest in those stocks which are likely to provide them maximum return on investment. For example, investors will want to find the most profitable business being sold at the lowest price. The stock market is a place where investors are able to choose such options.
Easy negotiation and low brokerage
Stock prices can go up and down but you will never have to go through the hassle of negotiating with the opposite party. You can also choose a brokerage house that charges a lower brokerage for running your trades. A low brokerage helps ensure that a substantial part of the investment is not lost in paying additional fees.
The main reason why investors invest in shares is the higher return on investment as compared to other modes of investment such as fixed deposits. Businesses usually give much higher returns than regular investments. Therefore, it is wise for investors to do diligent research and buy a well-performing stock, which is stable and is being offered at a reasonable price.
To answer the question at large: Yes, it is safe to invest in Indian stock markets; However, like all investments, one must research and plan accordingly. Without proper research and planning, investors make foolish decisions that eventually lead to losses. This is not the ideal way if you want to take advantage of the stock markets.
Investors need to evaluate the performance history of the stock as well as the business in which they are investing and understand the risks involved before taking any action. Only then can investors expect to make money in the stock markets. Happy Investing!