When legendary investor J.P.Morgan was asked to comment on the then state of dow jones index, he replied “Its changing”. But you can get a plenty of advice about share market from anyone on the street. If that person happens to be an investor himself, you can’t stop him. Alright, I’m not Warren Buffet, but I’ve the experience of wasting my dad’s money on investing for the past few months, so I’m something.
In the last few years, the share market has generated returns of 10-15% pa and has beaten other avenues like fixed deposits, postal schemes and senior citizens schemes hands down. But when it comes to retail participation, the numbers paint a grim picture. When companies like ONGC and HLL, which has consistently rewarded shareholders with good 6-7% dividends (not to forget the share premiums) have retail investors having paltry 3-3.5% stake, what can be said about others?
Okay, Harshad Mehta and Ketan Parikh may have put the fear of god in the minds of you and me, but share market crashes have taken place in other countries too. Or that India as a whole is a risk-averse country doesn’t hold much water either, if you consider the response for the IPOs floated by mutual funds. So what stops retail investors from participating from India shining story?
Well, for all the gung-ho about the share market returns, the retail investors don’t seem to be making money. If you book profits, won’t you increase your investment? It’s as simple as that. But why haven’t they made money? One they try to ride the wave when the market is booming and end up buying a lot of worthless stocks euphemistically called designated securities. You cannot make money in share market in short term. If you do, you are either a genius investor, an insider, extremely lucky or a combination of these.
A person who had invested in a HLL or infosys stock just after the black Monday crash of May 17, 2004 would have seen his investment doubled now. If you have missed it and want to invest now, all you have to do is hunt for some mid cap stocks with good growth prospects. And not worry about short term variations. Or if you are a completely risk averse investor you can go for blue chips whose valuations are down only because of market sentiment. Reliance currently is attractively valued when you see there is an imminent de-merger in a few months from now, which will invariably accompanied by either stock-split or bonus share issues.
India is shining for FIIs and so can it for you. If you choose to invest wisely.
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