Did you know that less than 5% of India’s population invests in the stock market? So what keeps many people away from investing in the stock market?
Many I know feel that it’s like gambling & based only on luck. Some feel that investing is only a game for the rich. Yet there are others who feel they don’t have enough to invest. Underlying most of these beliefs for many is the risk & fear of losing money – it’s perhaps the most prominent reason why people hesitate to invest.
What is Risk?
But what exactly is risk? When people say that a stock is risky, what exactly does it mean? In finance, the most common measure of risk is volatility or standard deviation, i.e. how much a stock/security tends to deviate from its average price. It’s simply a measure of the variation seen in the price of an asset.
Equities is generally considered to be the riskiest amongst all traditional assets like fixed income (e.g. FDs), real estate, commodities (e.g. gold), and currencies. This is because its price tends to deviate a lot more compared to others. There are many reasons why this happens – performance of a company, current sentiment, broader economic conditions, etc.
Equities is indeed a riskier asset class – but it’s exactly why it has been also more rewarding in the long-term. Average equity returns (measured by the Nifty-50) over the last 20 years have been far higher than that of other traditional asset classes people invest in, returning ~14.19% on average where Real Estate gave 11.69%, and gold far lower at 8.72%.
The difference between 14% and 11% might not seem a lot – but it really makes a big difference over the long-term. If you had invest ₹1 lakh 20 years ago, then that would’ve grown to approx. ₹14.21 lakhs today with equities, but only ₹9.12 lakhs with real estate and ₹5.32 lakhs with gold!
Steady Start with 5paisa Pravesh smallcase
It’s important, especially psychologically, to have a steady start when investing in equities for the first time. Many people unknowingly invest in very volatile (risky) stocks, and end up losing a portion (or entirety) of their investment. And many of them, never to return to the stock market.
As such, your first investment in the stock market should be in the right set of stocks – those that ensure investors enjoy the benefit of long-term wealth creation without taking undue risks.
The 5paisa Pravesh smallcase has been curated by the 5paisa Research team keeping this in mind, specifically for the needs of the new investor. It includes quality stocks from the largest 200 listed companies that have witnessed a growth in their revenue & earnings over the last 7 years.
The smallcase is spread across multiple sectors & has companies like Asian Paints, Aarti Industries, Hindustan Unilever, and Infosys. Since it’s designed for new investors, it has 0% exposure to riskier small-cap stocks.
If you are a new investor & are looking for a steady start in the stock market, the 5paisa Pravesh smallcase might be ideal for you.
5paisa launched smallcases in January 2019, and the 5paisa Research team has created & manages 3 smallcases since. smallcases are portfolios of stocks/ETFs that have an underlying theme or an established investing strategy. smallcases are inherently diversified, have no additional cost other than standard brokerage, and prove to be far more cost-efficient than mutual funds in the long-run. Login now with your 5paisa account to invest in smallcases.