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Are you investing in equity for a good reason?


In the last year, the stock market has boomed. Everyone wants to invest a certain portion of their income in equity. People are excited to be a part of the stock market. You might think that your money will double in short span of 6-12 months. However, before investing you must pause and reconsider: why do you want to invest in equity? You see everybody around you investing in stocks and earning profits. This may prompt you to do the same, too. Well, the market fluctuates. It can turn bad too. In the short term, it is even more unlikely that your investments would fetch good returns.

 

Or are you thinking, you have idle funds lying with you, and when everybody else is investing, why not give it a try? Mind you, if you don’t have knowledge about the market, don’t take a careless plunge.

 

However, if you truly wish to increase your wealth in the long term, you should take the stock market route for investments. And this is the right time to start investing in equities. Below are five good reasons, considering which you might choose to invest in the market.


  1. Growing Economy: The Indian economy is growing at a fast pace. The stock market can be used as a barometer to measure the health of the economy: a bullish stock market indicates a healthy economy. It means that businesses are performing well. Hence investors want to invest in the stocks to earn dividends and profits. This, in turn, increases the value of stocks. It is almost a chain reaction.

  2. Avoiding Conventional mode of investments: Investments like fixed deposits, PPF etc., suffer the brunt of inflation. For eg., you may lock your funds for 5 years in a fixed deposit with a bank at 7%. Your returns will not grow in proportion to the growth in the inflation rate. In such a situation, equity is the best investment where your money grows in sync with the economy.

  3. Economical: Anyone can invest in stock market. One can start SIPs with just Rs 500 per month. Stock prices vary from company to company. Nowadays, various new securities and tools with reduced prices have also been introduced to attract more retail investors.

  4. Portfolio Diversification: You can invest in multiple stocks, selecting from a range of high volatile to low volatile stocks. Design your portfolio to ensure that even if you incur some loss in one stock, it gets compensated from profits in other. Here, the overall risk of investing gets minimal.

  5. Effective Management: There are many asset management companies in the market which attract retail investments and allocate funds in various stocks. So don’t worry, if you know only a little about the market. Most fund managers have technical knowledge and years of experience. They have an entire research team. You just need to ensure that your fund manager has a good track record in the past.


 

With all the above benefits, it is clear that you must have equity in your portfolio of investment. It is essential in the long run.

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