Is investing in the equity market on your mind all the time, but you feel apprehensive about taking the first step? Most people shy away from investing in the equity market due to the many perceived risks it poses, particularly when you invest your hard-earned money in stocks. Since the word stock is frequently accompanied by the term ‘volatility’, certain biases and prejudices generally crop up in the minds of Indian investors.
This article covers the key aspects of investing in equity, discusses how investors can potentially earn a good return on investment, and specifically analyses the advantages of investing in the Indian equity market.
Why Should I Invest in Equity Markets?
There is no true alternative to investing in the stock market. While low-risk investment options like fixed deposits seem comfortable, they do not offer the returns equity can give you within the same period. The difference in earnings is usually quite significant, and one cannot help but notice how little they would have earned had they chosen any other investment instrument.
Also, think about how your expenses have increased year by year. Hasn’t inflation burned a hole in your pocket? In fact, inflation is a key reason why people feel their regular investments do not seem to grow fast enough or offer returns that improve their standard of living. So, for those who plan to strengthen their finances and build wealth in the future, equity markets are the way to go. We have several points to support this statement. Let us go through some prominent ones in the section below.
Advantages of Investing In the Indian Equity Market
Let us jump right in and see why equity market investments make sense. You can expect good returns, hold ownership rights, combat inflation, enjoy regular dividends, maintain liquidity, and stay safe with limited or low liability. You could even be eligible for certain tax benefits. Additionally, the Securities and Exchange Board of India (SEBI), the apex market regulator in India, is believed to be among the most vigilant regulatory bodies worldwide. It ensures securities and stock markets are streamlined and enforces regulations to protect the interests of every market participant, with investor protection being a vital objective. Hence, you can invest with confidence.
When you decide to invest in the equity market, you must pay adequate attention to diversification. Diversify your portfolio to control and reduce investment risks. When you have a portfolio built using instruments from varied asset classes, you can rest assured that your exposure is relatively controlled. Though no investment options typically offer the returns equities can give you, a mix of debt and equity is ideal to avoid building a high-risk portfolio.
If investing directly in stocks worries you, begin by exploring mutual funds. Index, multi-cap, and debt funds offer enough cushioning to ensure you do not take a serious hit if stock prices fall. Exchange-traded Funds (ETFs) also offer security and peace of mind to new or first-time investors. As you get accustomed to watching the market and making trading decisions based on the changes seen in the market, your perspective of direct trading is likely to shift.
Isn’t growth one of the chief goals of any investor? One way to grow your wealth is through rights issues and bonus shares. Companies raise additional capital through rights issues, which, by definition, are additional shares offered to existing shareholders first. Bonus shares may also be extended to investors in certain cases. As the name indicates, bonus shares do not require investors to spend money to buy them separately. At times, bonus shares may be issued in place of dividend payments.
Lastly, we highly recommend investing in equity if you are in for the long haul. If you are a long-term investor, you will be insulated from many risks born out of volatility.
The Indian Equity Market – Find a Great Way to Build Wealth with NIFTY
The equity market enables trading shares of various publicly listed companies trade on the stock market and those with reasonable judgement and knowledge can earn significant returns. One of the best ways to stay safe while investing in the Indian equity market is to refer to the NIFTY 50. A stock market index, NIFTY 50, lists the top 50 companies based on market capitalization trading on the National Stock Exchange (NSE) in India.
The primary advantage NIFTY offers is that an investor need not conduct extensive research to analyse, assume, or interpret the market. Since NIFTY 50 highlights the top 50 stocks, the need for additional research about which stocks are doing well gets eliminated. Hence, the costs pertaining to the investment activity are low, i.e., you need not juggle multiple stocks, or run complex simulations to arrive at decisions. You may buy stocks directly or consider mutual funds that invest in the NIFTY 50 to enjoy the benefits these stocks offer without exposing yourself entirely to the relevant risks. Also, since the index only comprises stocks of reputable companies with a great track record and efficient management, liquidity may not be a problem. You can easily liquidate your investment if the need arises.
Another specific advantage of investing in the Indian equity market is the access investors get to expert opinions and advice through various online platforms and apps. You can even join forums to seek opinions from seasoned investors before investing. For instance, you can refer to the research reports Motilal Oswal publishes to get an insight into the various investment avenues you have as an Indian investor.
What Does the Indian Stock Market Look Like Today?
A recent Forbes report says that the Indian market is currently of particular interest to Foreign Institutional Investors (FIIs). Riding on the back of record earnings and high returns, especially in the FMCG, auto, and some other sectors, the market looked quite promising in July and August 2023. Experts believe the growth streak will continue as long as inflationary pressures do not adversely impact equity investment and push investors to consider bonds and other debt instruments. All in all, this might be a good time to join the equity market bandwagon and earn enhanced returns!
It is safe to conclude that equity market investments are crucial if you wish to grow your wealth and gather sufficient financial resources to meet your upcoming long-term goals. Despite the market risks associated with equity investments, generating regular revenue and building a corpus are strong incentives to begin investing right away.
For more information on how you can invest and which instruments to consider, visit our website and speak to our financial planning experts.
Disclaimer: This blog has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The information/data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, estimates and data included in this blog are as on date. The blog does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Readers shall be fully responsible/liable for any decision taken on the basis of this article.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.