Mar 1, 2020
Will you roll the dice in the Stock Market?
By Punith Salian on The Capital
The stock market has been a taboo for most of the working class of people. The general tendency of the people is to be cautious about their hard-earned money. In the olden days, gold was considered to be an ultimate possession of the rich. Till today, most of us have the same mentality about gold. One will always go with safer options when it comes to investing money.
Many of us would not have considered the stock market as a means of investing, growing money, and at the same time, it is not an easy means of doing so. One has to deal with risks, have patience, emotional control, decision making, etc. It would test all the human characters. The stock market is purely an emotional way of dealing with money. It is a roller coaster ride experience with your hard-earned money on the line.
The stock market also offers a variety of platforms to choose based on one’s risk appetite and the desire to make money. One wrong move will end up in losses and see the darker side of it whereas, the calculated correct move will end up in profits and a brighter side. Therefore the charts are filled with mostly two colours Green and Red.
Stock markets deal with a plethora of companies putting up their shares, numerous AMC’s with their mutual funds, IPO, and lots more. Therefore understanding what the stock market has to offer should be known to everyone who wishes to enter into it.
If you are investing in stock markets, then keeping a watch on the stock market is a must. One seems to be so busy with the day to day work, then it would be still good to invest in mutual funds where dedicated fund managers choose a portfolio and create a fund.
There are numerous books on the investing techniques, about stock markets, history of its creation, its operations, and terminologies involved. All these should be known well before one steps into the world of the stock market.
A portfolio is a collection of stocks, mutual funds, and other investment instruments. It’s very clear that the above portfolio seems to be dealing with the reds, and the bear market is in rage pushing all the stock prices to fall. This is a tough time, and this is also considered as the testing time. A wise investor would still not be disheartened and makes a profit even in such conditions. The present market scenario at the time of writing was a bear market where the prices of stocks are stumbling, but an investor has to be patient enough until this phase passes away.
There is always a trade-off between how much time you are willing to spend and how much is your desire to make money. If one is not willing to spend more time, then mutual funds are the best option where your invested money is taken care of by the fund managers, and one trusts his money will be safe with the experienced fund manager. Here the portfolio of stocks is selected by the fund managers, and one does not have control over its returns.
Whereas the other options, stock investing, which I am particularly interested in, need time and patience. Here you have the full flexibility to build your portfolio and are ready to take higher risks with the ability to give higher returns, at the same time, be prepared for the losses as well. One needs a good understanding of the market, trends, news, etc. Timing of purchase — buy, sell all matters here and emotions have to be kept under control no impulsive decisions. There are a lot more guidelines to be followed as per the experts in the field who have set the guidelines. It’s better to know these guidelines that help in operating under any condition of the market.
Ultimately, the stock market is nothing but a platform for buying and selling. It also follows price action of supply and demand which generally is not observed by the common investors.
There are categories of companies here Large Cap, Medium Cap, and Small Cap companies. The categories are made based on market capitalization. Large-cap companies are usually well-established companies and do not show significant fluctuations in the stock prices, and it is safer to bet on these kinds of stocks. Whereas Mid Cap and Small Caps are associated with a higher degree of risk and also potential to give higher returns as these are the growing companies.
Trading and investing are two different terminologies that are commonly used. A trader is the one who buys and sells stocks mostly daily. An investor on the other end buys and sells stocks within weeks, months or years together. Then they are further divided into short term investors and long term investors.
Strategies like fundamental analysis, technical analysis and which kind of approach one has to follow in the market. A trader generally does technical analysis with the help of the different charts and indices. An investor usually does a fundamental analysis concentrating on the company strategies, performance, financial conditions, etc.
Then there are other options like the Mutual Funds. This is a category for those who are willing to invest but are not ready to give any time to the stock market. They can simply buy a mutual fund after due research on the kind of mutual fund that is suitable for them. The mutual fund managers are the custodians of the investor’s money. This is the safest option that is available in the stock market.
These are the roles that one can play in the stock market a trader, a short term investor, a long term investor or a mutual fund investor. It up to one which role they want to play and roll the dice.
Long term investors might be well suited role for the working class of people who have a primary job at stake and willing to make little more money with the help of the money earned from their jobs.
