We all know there is a lot of negativity and societal dogmas in our society and country about the stock market. But why? Do you know the exact reasons?
I’m going to explain the peculiar notions of society and the main reasons behind those apprehensive beliefs through a small story.
There were two friends “Sharma Ji” and “Verma Ji”. Sharma Ji wanted to invest his surplus money somewhere to obtain returns after a few years, but he did know how he would. And here is when Verma Ji comes to his rescue. Verma Ji suggested his friend to invest money in the stock market giving the justification that Sharma will double his money in a matter of few years.
‘Sharma Ji agreed with his friend’s advice. But for a man like Sharma stock market was an unknown territory. Having no idea of investing, Sharma Ji decided to have a word of advice from his friends he confides in. Mr Sharma asked his friends to suggest him companies he can invest in to secure handsome returns within few years. Looking up from news and rumours his friends recommended Sharma Ji some companies he can invest in for the long term. Mind you! Sharma’s friends were not into the stock market too, based on rumours and news they heard in bits-and-pieces they recommended stocks Mr Sharma can invest in. Without any second thought, Sharma Ji went according to his friends’ recommendations and invested a big chunk of capital in those particular stocks.
After a few years, something happened which Sharma did not expect to happen. His portfolio value is dropped by 40% from his buying position! This set poor Sharma off very badly and he got depressed over the loss of his hard-earned money. And now you know what happened next!
He started telling all his friends and relatives “Don’t step in the stock market. It’s nothing more than being in a casino, putting your money at stake! And here’s no way you’re are coming out of it with profits. It’s a gamble! That’s all.”’
So my question is what were the main reasons behind this incident?
- Sharma Ji never did his research and investigation on stocks or companies in which he invested his money in.
- He doesn’t have any idea about portfolio management and how to invest money.
- He doesn’t know the basic criteria for selecting good companies for long term investment.
- He doesn’t have proper knowledge about the stock market.
- He took suggestion or advice from unprofessional people who also never invested in the stock market.
So the simple solution is, before starting any business firstly we need to know everything about that business like how it works and all the basics.
- Get proper knowledge of the stock market.
- Learn about how to invest money for the long term and how to select good companies.
- Learn money and risk management.
- Patience, self-discipline and keeping yourself updated about market news can make you earn decent profits from trading and investment.