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Investment Myth 2: Stock Markets Are Risky
This statement is so common. You might have heard it in movies, serials, multimedia, and even within your family and friend circle. But that’s only partially true, So, let’s look at the less known side of this seemingly simple statement.
There are only 13.5% of investors in the Indian equity market and just 1.5% in the mutual fund market. But why is this number so less? The answer is easy, people are afraid that all their life savings will be gobbled up in the ever-changing trends of the market. You may be thinking that that is right, but you couldn’t be more wrong!
Investing in the right place at the right time is key. How do you do that? Well, read on to find out.
The markets have been stabilized after Operation Sindoor but uncertainties remain regarding the oncoming of a full-blown war. Even in the case of active war, we can look at historical trends to guide our way forward.
When India has faced conflicts in the past, our markets have always bounced back stronger. During the Kargil War in 1999, stocks initially dropped about 8% as panic set in, but ended that same year with impressive 15% gains. Defense and infrastructure companies did particularly well. Later standoffs with Pakistan in 2001-2002 brought similar patterns – initial drops followed by recoveries, with pharma and tech companies serving as safe bets during uncertain times. By 2016, our markets had matured significantly, barely flinching during the surgical strikes with just a small 1.6% dip that recovered within weeks.
The lesson? War brings temporary panic and selling, creating good buying opportunities for patient investors. Companies with strong fundamentals tend to weather these storms best, while defensive sectors provide shelter until the situation stabilizes.
Find out how much you need and when you need it, because planning is the first step in achieving. Prioritize the goals that you want to achieve. It can range from buying a new vehicle to planning for retirement.
This is an essential step. Putting your hard-earned money in stocks and shares that you have googled or have been suggested to you by a friend or an acquaintance is not a great idea. Approach the right persons such as a financial adviser and market research specialist. They have the best knowledge and will give you sound financial advice that is in your best interest.
There is no shortcut to success you must take the long route. Short-term investments may look inviting to gain good money but there are too many pits and falls. Investments in Day Trading and other such instruments can give 50% returns in a few days or drag you into deep debt in no time. Invest with a horizon of at least 3-5 years or more that will provide sustainable growth.
Once you have invested you will have to wait. The market will fluctuate by going up and down but make sure your BP does not. Have confidence in your well thought out investment. The stock markets have always rewarded patient investors. And as they say, sabr ka fal meetha hotha hain.
When your investments are ripe with returns, don’t hesitate, it’s yours for the taking.
A few tips and tricks:
- Invest in mutual funds rather than stocks as the risk in mutual funds is spread across. A single stock can carry a lot of individual risks.
- Don’t be greedy. Simpler said than done but we have to be cautious. Once the investment has reached a good peak it would be advisable to book profits.
- Invest regularly. Make a habit of saving and investing.
We at Redwood Financial Strategists can help you achieve all your goals and dreams. Look us up and drop us an email if you are interested in what we have to offer you.
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