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Why investing in Stock Markets is crucial !!!

Kulin Choksi | Saturday 10 September 2011 ( 3 Comment)

     Its so often called as the gambling den among those who hate stock markets. But for some its a money making opportunity and for some its the most riskier asset class to invest in. We can categorise it by many different views but the most fundamental reason to invest in stock markets should be the return which it provides over a longer period of time when compared to other asset classes. Many young and middle aged salaried class people always stay away from the stock markets. But it shouldn't be like it. We all have learnt that its always better to start investing early to reap the longer duration benefits. Out of all the investment avenues we have i bet on equities more then any other investments. You must be wondering why is it so attractive then any other asset class? The reason behind it is that stock markets are the best or one of the most important barometer of the helath of an economy of a country. Getting into the basics of this investment we would understand that its the most important and an attractive asset class.

    Stock market consists of an indices which further consitsts of companies that are listed on the indices. We have two major indices in the indian stock markets namely 1) SENSEX and 2) NIFTY. Sensex consists of 30 companies whereas Nifty consists of 50 companies. So eventually when we buy shares we are investing into a company and its future growth. To explain it in a better manner for eg: Reliance is one of the listed company in both the indices so when we purchase one share of reliance we have indirectly invested into the growth of a company by being a part of it. To put it in numbers when reliance was first listed on the indices it had put a price on itself which could hypothetically be Rs. 100 per one share and the year would be 1990. So when i had bought one share of reliance in the year 1990 it would have cost me Rs. 100 and as long as the time passes by and the years goes by the company has grown in terms of margins and have expanded substanially and today in the year 2011 the price os one share of reliance is at Rs. 878. If at all i am holding the share till today which i had bought at Rs. 100 i can sell it today at Rs. 878 with a huge profit of Rs. 778 in 20 years (778% profit in 20 years). Hard to imagine right !!! This is how it actually works.

   Even though many of the investment firms have made it difficult to understand the customers with its languages. If one goes deep into the understanding of the functioning of the stock markets one can easily achieve a very attractive return over a period of time as compared with other asset classes. Few disciplines needs to be followed and few decisions need to be taken and the money keeps growing.

   Stock Markets are not such a bad asset class. They are the most important part of all the asset classes and the proportion of theirs in the asset class should always be higher. Start investing early and at the root. Many companies still exists which has a lot of growth potential in them. To name few of them would include 1) Coal India - Largest coal producing company in India and has a monopoly in the Indian Markets. 2) Larsen and Toubro - one of the largest and finest construction and engeneering company. Love the stocks and they will love you in return.

    " Dont make your money grow , Let the money grow for you"

       " Your Thoughts, My Words"

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