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Common Excuses People Make For Steering Clear Of The Stock Market

"You need a lot of money to invest in stocks"
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We all read and hear about the stock (or equity) market in the news. Sometimes the market shoots up, and makes everyone happy. At other times, it nosedives, and plunges investors in gloom. These notions of volatility and risk keep a large number of people away from the markets. However, the reality couldn't be more different.

It is a fact that India's stock markets are well monitored and regulated. A number of steps have been taken by authorities to protect investors, especially those who trade in smaller amounts. The markets have successfully weathered various crises, such as the 2008 global meltdown, and emerged strong. Despite this, it is not unusual to hear of people making various excuses even today to stay away from the stock market. Sample some of these statements:

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"Your money isn't safe anywhere except in the bank"

The bank is a pretty safe place for your money. But it's not the most efficient place, giving you annual interest of 4-6% or so on your deposited savings. With equities, you can usually expect a much better rate of return in the long term. Yes, the equity market comes with a certain amount of risk, but then risk is built into everything around us: our jobs and businesses, everyday travel, health, etc. Equity investors who plan their investments well and monitor them regularly can minimise their risk profile and maximise their wealth-creation potential.

"I don't need the hassle; traditional saving instruments are good enough for me"

There's nothing wrong with safe options like PPF accounts, bonds and return-assured government schemes. However, you need to consider whether these will enable you to meet your retirement fund goals. If you're 30 years old today with monthly expenses of Rs.50,000, this figure could easily become Rs.3 lakh or more by the time you retire at 60, with normal inflation. Equities can help your returns grow faster and create a larger 'nest egg' for you than fixed-return instruments. So do plan accordingly.

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"You need a lot of money to invest in the equity market"

The majority of investors in the equity markets are not high-rollers, but those with small corpuses to invest. How much you invest will depend on your individual risk profile. But even risk-averse investors can allocate 10-20% of their savings to equities that have relatively stable performance records. If you're really nervous about it, start with a small sum that you can easily spare, such as money received as a birthday gift or a small part of your salary bonus—and then review it periodically to see if things are on track.

"You need to spend time daily monitoring your investments"

Monitoring and reviewing one's investments periodically is a good practice. It helps you understand whether you are on track to meet your financial goals, or whether you need to reconsider your game plan. But if you're a long-term investor, you certainly don't need to monitor your investments daily. Instead, you can work with an advisor (like a broker or wealth manager) who will help you understand the current and expected performance of your shares and benchmark it to your goals and the overall market's performance.

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"Your money's going to become illiquid-what if there's an emergency?"

Your money is more likely to be illiquid if you invest it in gold or real estate than the equity market. Stocks can be usually sold very quickly at the prevailing market price. That being said, experts agree that equities should be a long-term commitment. Making money overnight should not be the objective of a serious equity investor.

India's equity markets have delivered good returns to investors over time. A great way to participate in the markets without having to become an expert yourself is through mutual funds, which offer the benefits of growth, diversification, liquidity and professional management of your funds. The recent 'Sahi Hai' campaign by The Association of Mutual Funds in India (AMFI) seeks to educate investors about the advantages and misconceptions prevailing around mutual funds in India.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

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This article exists as part of the online archive for HuffPost India, which closed in 2020. Some features are no longer enabled. If you have questions or concerns about this article, please contact indiasupport@huffpost.com.