If you follow the equity market, you will come across posts that will make you invest everything in the equity market (do not do it, asset allocation is important). We are talking about posts like below –
If you had invested Rs 1 lakh in Bajaj Finance in 2010, you would have made Rs 4.5 crore in 2020.
There is no denying the numbers are correct. Like Bajaj Finance, many other stocks have given similar results in the past. However, there is another side to the coin.
If you had invested Rs 1 lakh in Yes Bank in 2017, it would be Rs 4000 in 2021.
Investing in the stock market is very simple. The problem is people make it complicated, and hence they end up losing money. Before we see how to make money, you must understand why people lose money in the stock market. Below are the top four reasons for the same –
Invest based on tips – The number one reason people lose money in the stock market is that they do tip-based investments. The person who has shared the tip does not intentionally want you to suffer losses. But you can never be sure of his sources. You may argue that you got the tip from a broker or a friend who knows a lot more about investing. Yes, but at the end of the day, you are the one who cares most about your money. If you lose money, are they going to cover your losses? Certainly not, and hence you should know where you are investing your hard-earned money before you even think of investing.
Trying to make quick money – There are no shortcuts to success – be it life or investing. If you are looking to make quick money, you should not invest in the stock market. On one side, people are happily putting money in fixed deposits and receiving 6% returns. On the other hand, when people invest in the stock market, they want to double their money every year. It does not work that way. You need to give time to your investment. People fail to realize – Even if your money doubles in 6 years, your rate of return is 12%, double that of FDs.
Cannot take the loss – When you enter the stock market, you have to stay at least for five years. Another reason people lose money is that when they make a loss in the initial few investments, they declare the stock market is risky and exit all their investment in the loss.
If you had invested in Tata Motors in the second half of 2018, you would have bought shares around Rs 250. It went below 200 in January 2020 (when the market was doing good). Someone who could not see his capital in losses and lost patience would have exited. They would have lost 20% of their capital. Fast forward 18 months, the stock crossed Rs 340 per share.
Not able to control emotions – Most of the time, you act purely on your fear or greed. For example, your friend bought a stock that gained 50% in the last three months. You look around and see everyone is talking about the same company and making money from it. In greed, you invest in the company without knowing the fundamentals of the company and its business. Yes, you can also make money if the bull run of the stock continues. But, more often than not, you will end up losing money.
Above, we have seen why people lose money in the market. To make money from the stock market, you have to do the opposite. So here are the things you need to do –
- Educate yourself and analyze the stock, and based on your risk profile, invest in the stock market.
- You should only invest in the market if you are ready to hold on to your investment.
- Loss is part of the process, so you need to have patience if you know you have invested in a good stock.
- Understand when to buy a stock and when to sell it and not invest based on emotions.
The four points above may look easy, but implementation is the problem. Everyone knows it, but the actual implementation never happens for most investors. Secondly, you need to put in both time and money to learn and master the above points. Not everyone has the time, while some may not be interested. However, if you understand anything about the market – you would want your money in the market.
If you want to make money from the market but you don’t have the time and resources to do it – Jarvis is one such platform that helps you get good returns over time even if you do not know the market. It takes care of all the points we discussed above –
- It uses AI technology, so the understanding part is there.
- It recommends stocks based on your investment horizon.
- It picks only good stocks from the whole lot.
- You get recommendations from Jarvis –when to buy and sell your stocks – not out of emotions but based totally on numbers.
As we said earlier, making money is easy – you either should have the knowledge or the right tools to make money. Jarvis is one such platform you should definitely explore.
