Stocks, Fixed Deposits, and mutual funds are the most common investment products. All these Investment products have higher risks and potentially higher returns than savings products. Stocks provide the highest average rate of return among these investments. But there are no guarantees of profits when you buy stock. This makes stocks one of the most risky investments.
Therefore, Only 2% of the Indian investors invest in the stock markets. People generally have more trust on Fixed Deposits than the stock markets.Investors prefer traditional methods of investment that give sure shot returns.
The majority of people lose money in the stock market. So, people consider the stock market to be risky.The majority of people who lose money in the stock market are not financially educated. They take a lot of unnecessary risks. Investors need to adopt a balanced approach to minimize risk and maximize the reward by following a reliable investing strategy for getting returns from the stock market.
Stock market is risky because people do not understand the day to day fluctuations in the market. They cannot relate the upward or downward movements of the share price with the company’s performance. Therefore, they consider it as another form of gambling. They think that no one can surely predict future outcomes, but just speculate the market.
A couple of past market crashes in the Indian stock market has also deterred Indians from investing in the Stock market. They do not want to see their investment falling to the ground.
Investment in the Stock Market is considered as one of the best ways to generate wealth. Any investor can achieve their long-term financial goals by investing in the stock market with a strategic investment plan and data-driven decisions.
The Stock Market works on a simple principle of risk-reward. Higher risk offers a better possibility of earning higher returns. Hence, Investors need to be aware of risk in stock investments before investing in it.
Equity investments are the only asset class that can beat inflation in a growing country like India.You will struggle to grow your money if you are young and do not have 70% of your savings in equity. The power of compounding will work against you.
15% compounded annual return from Stock market investments can help you a lot in fighting inflation than a linear return of 4% on savings. You should increase your wealth by investing rather than to degrade its face value by inflation.If you need to make money in the next two years, invest in something less volatile. You should invest in the stock market if you want to make a fortune in 20 years.
Risks involved in the Stock Market
These are the real risks that every investor should be aware of before investing in the stock market.
1. Speculating the market:
People buy stocks because they believe that the price of that stock is going to rise. Investing only on the basis of speculation is risky.
2. Futures and Options:
People should not invest in Futures & Options without proper knowledge as the number of people losing money in F&O is relatively high.
3. No Proper Strategy:
Investors should have a good strategy for Investing in the stock market. They should know the time to enter, time to exit, total investment amount, portfolio allocation etc.
4.Tips from Brokers:
Investors follow brokers or friend’s recommendations blindly for investing in stocks. Buying stocks on ‘TIPS’ or recommendations always invites risks for the investor in the market.
7. Lack of Patience:
You cannot create wealth if you don’t have patience for investing in the stock market. Stock market is risky for impatient people. The impatient people lose their money in the stock market and they transfer their wealth to the patient people in the market.
CONCLUSION
Till now, you would have got the answer to this question “ Is Stock Market Risky”.
Stock market is one of the best places to make money from your investments.Every investment has some risk involved in it. Depending on the type of risk taken by the investor, the reward is achieved.
Watch the video to find out the Top 5 reasons why people hesitate to invest in the Stock market. We have also mentioned the top 3 reasons why you should Invest in the stock market.
