What was your biggest fear in childhood? Was it an illusionary monster which you imagined may have been hiding in beneath your bed or the fear of heights?
People have different types of fear. Fear of investing in stock market in India is just one of them.
As a child my biggest fear was Katsaridaphobia, the fear of cockroaches. This prevented me from doing lot of things such as walking near drains or opening kitchen cabinets and cupboards where I had spotted cockroaches before.
When it comes to investing in the stock market in India, many people have the same issue. It is fear that keeps them away from stock market in India despite the fact that equity offers the highest returns among all asset classes.
A recent study pointed out that over 66 percent of people have the fear of losing money in the stock market in India. The study further classified them into three sections based on the type of fear they had.
One section comprised of people who have never invested in stock markets in India but still fear it because of the many myths associated with it or the horror stories of wealth destruction which they have heard from others.
The second section of people comprised of people who lost money in the stock markets in India because they invested in the wrong stocks based on stock market tips given by others.
When one invests on the basis of stock market tips given by others, the chances of losses are very high because the people who provide these tips, themselves depend on others. So there is no logic behind these tips.
The third section of people comprise of people who start getting worried when stock markets in India starts correcting. Irrespective of the type of stocks they are holding in their portfolio, they go into panic mode due to fear and sell off their stocks for a loss trying to salvage whatever is left in their portfolio.
Fear has two meanings. Forget everything and run or face everything and rise.
If you want to overcome your fears of stock markets in India the below pointers are exactly what you need:
Do your homework
Before buying any stock, check the earnings, profitability, debt and future growth prospects. This will give you a clear picture of how the stock is likely to perform in future.
Invest in installments
Taking small steps one at a time is an effective way to master something new. The same principle works effectively while investing in stock markets in India too. This way you can effectively understand how stock markets work while limiting your risk.
Avoid stock market tips at any cost
Never invest on the basis of stock tips, rumors or hearsays.
Be patient & maintain a long term perspective
No matter what you do, stock markets in India cannot create wealth overnight. So it is very important to be patient and maintain a long term perspective by ignoring the short term ups and downs.