Why one should invest in stock markets?
By Pinkerala News Desk | Nov 11, 2017
India has the distinct advantage of being a major emerging market in the world with matured stock markets like Bombay and National stock exchanges. When we think of investments we generally compare with the interest rates currently prevailing. For term deposits, we fetch around 7% or so annually. So if any return much better than 7% is attractive. Again to neutralize the increasing rate of inflation we need to put our money in investments wherein we can fetch higher rate of returns.
Advantages of investing in shares.
1. The chances of capital growth and returns over a period are high provided you invest your money prudently.
2. You can put any amount as you wish without any hassles and also get out without any difficulty unlike in a commercial project which requires a large amount of capital.
3. You can sell the shares and get out at any point of time unlike in any investments which involve land, plant and machinery, building etc.
4. You are entitled to dividends, preferential allotment, rights issues, bonus shares etc., over a long-term period, depending on the company’s performance.
5. India has an impressive growth rate of 7.5% in its GDP and the economic reforms are to stay here. This will boost the performance of corporate in the coming days which will yield handsome returns to the investors.
There are three types of trends in the stock markets. The first is the primary trend wherein the hardcore investors will put their money in stocks at very low prices which are not yielding any returns; rather they expect a turnaround in the medium to long-term. Once the primary trend takes momentum there will be a slow and steady increase in the share prices. At this point, these stocks get the attention of medium-term investors and they will start accumulating these stocks. This is the intermediate trend. Once the intermediate trend sets in, the stock prices increase in a much faster manner. Once the intermediate trend gets high momentum, the speculators get into these stocks and the prices are pushed to very high levels. The prudent investors who aspire for fast returns get into the stocks during the beginning of the intermediate trend and get out before the speculators take over.
Basically, it is a battle between the Bulls and the Bears. The Bulls are always optimistic about the price and they always push the price to dizzy heights even ignoring the fundamentals. At that time the Bears who are always pessimistic about the prices start selling thereby prices tend to come down in correlation with the company’s fundamentals. This phenomenon continues forever and that is what stock market operations are.
The market movements are measured by indexes such as BSE Sensex, Nifty and other sectoral indexes such as midcap, IT index, Bank nifty etc. The movements in these indexes will show the market behaviour for a day or week or month and so on. Now we are in a bull phase and is the time to invest in selective growth-oriented shares.
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