Today let us discuss how for the majority of investors equity is so unlucky and must not investment product. This behavior pattern was developed either through their own experience or from others. They never analyze what went wrong in their past equity investment. Simply we mark it as “Equity Investment is Risky” !!! Is it so??
Before proceeding further we must sum up few strange ideas like what do you mean by equity investment for few.
1) Equity Investment=ULIPs
When you ask someone to invest in equity their first reaction is a big no as they experienced the loss in their previous investment and the product is also not the pure equity investment. They are the combination of Insurance+Investment products (which were costly before IRDAs regulation). In few of such ULIP products expense ratio was so high that in first year it was around 60%. Then how can they realize the positive return in the short span of even within 10 years? This made them to stay away from equity investment.
2) Equity Investment=Direct Stock Investment
Eventhough it seems correct but for the beginners or persons who are unable to track the investment this is a huge risk. They invest simply following the tips provided by either by some news channels or through friends. But not following their own risk appetite and the research idea. The result is a big loss of principal.
3) Investing based on the tips is good-
When I started my stock broking franchisee, I flooded with questions like am I provide stock picking tips? If so they are ready to invest !!! Mean everybody these days in need of ready-made suggestions but not their own research based ideas.
4) High expectation-
Yes few think that they need to earn daily around Rs.1,000 by investing Rs.25,000, because they are investing in equity market. But they forget the simple basic idea that return always be associated with risk also. They take big risks and incur the loss.
5) Over confidence-
If they loose money they again invest more in anticipation of square offing that loss and booking profit than what they lost. But they never judge the market condition and forget the idea that “Trend is Friend” !!!
Now below are the few market situations and I will show you for each market conditions how equity investors react. We take that Nifty touched the breadth of 5000. From now onward let us see how investors behave for each condition of market movement.
1) Market jumped from Nifty 5000 to 5400 within a two trading days-Wow investors start to look at it with hope that now market will start to jump and ready to invest the money.
2) Market jumped from Nifty 5400 to 5800-Investors start to think that it is a big loss if we miss the bus so we need to buy as the market is in an uptrend. They buy at this level.
3) Market now moved from Nifty 5800 6100-Thank god I didn’t waited and did a right decision by investing at low level.
4) Market start to go down from Nifty 6100 level to again at 5700-Wow it is correcting and so investors start to think that they need to again utilize this opportunity and increase their holding.
5) Market again will go downward from Nifty 5700 to 5500-They think it is the best time to double their holding and again they start to invest more.
6) Market again will go downard from Nifty 5500 level to 5000-Now they start to feel the heat as their all holding start to give negative return drastically.
7) Market again will go down from Nifty 5000 level to 4800 level-They look for help or news like why marketare going down and why few experts are not giving any opportunity of investment or positive news items.
8) Market will go down again from Nifty 4800 level to 4400 level-At this level they don’t have any clue what to do as their returns took a huge negative trend. So in a huge depression they sell all their holdings and book the loss. They will decide on that point that they will never turn again towards stock market 🙂
9) Market will again go down and touches a new low of Nifty 4000-They feel have that they came out early and they are proud of their decision.
10) Again down trend continue Nifty touches 3800-Now they again feel great about their decision making style and start to give tips on the same to others.
11) Slowly again market start to go up and within few days market again touches 4500 level-Again they look at it strangely why from low level of 3800 to 4500?
12) Nifty again touches 5000 level-They feel confident now and invest once again as they feel this level is best than their previous first investment in equity.
Finally history repeats again and again but only name of investors changes !!!
Even though it doesn’t resemble many but this is the trend how one experience the equity investment. Hope all of you will share the stories behind your own experience and let us learn together.