Despite its skyrocketing popularity, many people may be hesitant to invest in the stock market. Although the returns may seem lucrative, the risks involved usually act as pushback for many Indian investors. So, if you are among those who are still reluctant to take the plunge into the stock market, we share a few reasons to make you believe why you should invest in stocks right now!
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Top Reasons to Invest in Stocks
Number of people showing trust and interest in stock market investments in India has grown considerably. To second the opinion, the number of demat accounts in India increased to 12.97 crore in September 2023. This is a whopping 26% year-on-year increase! Why are so many Indians turning towards investing in the stock market, and why should you, too? Let’s have a look.
You can earn better returns on your investments
One of the main benefits of investing in the stock market is that you can earn returns on your investment. This means that, over time, you will make money when there is an increase in the value of the stocks or investments that you own. Imagine you purchased 100 IT stocks at ₹100 each. After 2 years, the stock price reached ₹150, meaning you earn a profit percentage of 50%! Hence, if you invest in stock, there is a possibility of earning higher returns compared to traditional products.
You can protect your wealth from inflation
Consider this phrase: “If your money isn’t growing, it’s losing”. This is what inflation does. So, if you wish to build wealth, investing in instruments like stocks, which offer inflation-beating returns, is very important. Historically, it has been observed that stocks have given higher ROI in the long run.
You can diversify your portfolio to manage risks
Most people fear investing in the stock market, and the prime reason for this is the risk of losing money. Although losses are as much part of the stock market investment as profits, limiting losses through proper risk management techniques is crucial. One of the most common ways to manage your risk is to have a diversified portfolio. For example, investing solely in single-sector stocks can make you more prone to unsystematic risk. Hence, you must consider portfolio diversification to limit your losses.
You have the opportunity to earn regular passive income
Since investing in stocks means you become the partial owner of the company, you are entitled to receive any dividends that the company decides to share amongst its shareholders. The dividend you receive increases the overall return on investments, and regular dividends can act as passive income.
You can liquidate your investments quickly
When you invest in stocks, you have a higher chance of liquidation compared to other investment instruments like real estate. Higher liquidity means there are a large number of buyers and sellers in the market. Hence, during a crisis, you can easily liquidate your stocks to fulfil your financial obligations.
Some Quick Tips Before You Start Investing in Stocks
- Decide your investment goals
- Do thorough market research
- Understand basic metrics and terminologies
- Do not get too emotionally involved in the stock market
- Diversify your portfolio
- Be prepared for a downturn
- Choose the right brokerage app
- Review and rebalance your portfolio regularly
Wrapping Up
When you plan to invest in stock, be prepared to earn significant profits but also be ready for any downturn. The tips shared above, including the right brokerage app and a good understanding of the market, can help you achieve long-term success.
