Capital Myths

If you listen to Warren Buffet, the stock market is a device for transferring money from the impatient to the patient. If you listen to the common man, it is a place where the privileged gamble. The former is a practical statement from an experienced man, the latter may be a hope, a myth or a bad experience, depending on who you ask.                                                                         

During the corona crisis, India saw millions of new demat account opening in a matter of weeks. Many of them were the millennials, aged 25 to 35. Many got lucky as the crisis progressed and the stock indexes buoyed. Beginner's luck? Only time can tell. What seasoned experts can swear by now is that success in stock markets is not mere luck. It is a process and like all predefined processes this one might work depending on how one executes it. But for now, let's go back to those myths that keeps many people from following the right process in the stock markets. Let's have a look at some of them:

•  Investing in the stock markets or Gambling, it is all the same

Although both gambling and investing involve money and an element of chance, an element of risk and the uncertainty of winning or losing, they are not the same. If done properly, for example, conducting analysis before taking a position, doing position sizing, having a risk management framework and strictly following it, one might turn the odds in their favour.

• The risk is unlimited

There is some amount of risk involved in investing/trading but the complete control is in the investors hand! Before you start to invest, understand the security, and the risk involved. Understand how much you are prepared to risk. Keep strict stop losses. And god forbid, if the stop loss hits, learn from your trade and improve your strategy.

• You need a heavy capital to earn profit

You don’t need millions to start investing, what you need is a small amount of money and a much greater plan comprising a detailed study of the shares of the company you are planning to invest in. There are various segments associated where you can start depending on the capital you have. But always, always, always understand the risks involved.

 

• Investing independently is time consuming

Growing trends in technology have completely changed the process of information transmission in the current age. This enabled an average investor to access information quickly and easily to make better and faster decisions. 

• Advisors misguide you

It is true that finding the right advisor for yourself is a task but once you find one, it is a real catch. There are no right or wrong strategies in the stock market, there are tons of different combinations of strategies and in order to find the right advisor for you, you do not need the best in the market, you need the one that suits you the best, according to your capital, time, risk etc. Once that is done, an advisor will do his job and that is to guide you through the journey. Look for SEBI registered experts. These are certified by SEBI after very rigorous evaluations. And always remember, experts also go wrong at times. Do not expect them to be 100% right, look for ones who can generate positive returns in the end.

It is rightly said that half knowledge is more dangerous than ignorance. The myths that exist today is often a result of lack of awareness, and the unfortunate experiences of those few who fell for the scammers promising sky high returns in no time at all. Proper and accurate research is the key to avoid such confusions. If you cannot do your research, you shall find experts who are good at it and seek their guidance. As they say, there are no good or bad strategies, just bad execution.

Disclaimers: Investing/trading in capital markets is subject to risks. Please consult your financial advisor before participating.