Is Stock Market really a scary place? (to invest)

Ever wondered why many people think of the stock market as a scary place? This is the question that I’ve tried to peruse many a time.

During my graduation days and early career phase, many of my relatives, friends aren’t aware of the stock market as an investment option at all.

Whoever knew about it, had shown aversion towards. And that list also includes me. Even today there are many who come under such categories and who knows, they too might’ve got the same question within their minds.

The general perception – Stock Market

There are varied reasons for this, and some of them are also valid. When it comes to the stock market, it looks like a gamble.

Initially, I wondered how could anyone make money without any physical effort? Many questions used to run in my mind.

Is the stock market a scam?

Is it even worth thinking about it?

Is it worth taking risks by investing? And the list goes on…

Generally, the majority think that the money earned through physical effort is real money. Nothing wrong with it, in a sense.

Even I have heard people who made successful investments during their early experimenting days, had withdrawn money by selling a few securities, just to check if what they’ve earned is real money. 

But the truth is, even the businesses behind stocks are run with blood and sweat. Just the stock market is the face for them to raise capital by keeping their business information open to the public.

Reasons for Misconception

Also, another primary reason that many people maintain a distance from the stock market is due to the proportion of risk.

Yes, the stock market is where there is a higher proportion of risk that one has to take, relative to the other investment options like real estate or physical gold, etc. Also, there is no denying that people are risk-averse many a time.

Another reason that the stock market is unpopular for, is scams or frauds. From Ponzi schemes to Accounting scams to Insider trading have created a scare among the people and the middle class in particular.

Further, the manipulations in finance books, inflating the stock prices without real growth, etc have made the stock market more infamous. It is greed that is responsible for such activities and the stock market is not the only place where we see that.

The truth

Anything that we don’t understand looks either as a miracle or as a gamble. If we don’t know the science behind the video chat in facetime app (or) about the internet, then even today we will see that one talking with another at a distance thousands of miles away, as a miracle.

So, it is due to the combination of various factors like the lack of understanding, the scams, the general misconception that stocks are paper money, and the lack of knowledge to pick stocks (or) about their businesses which are responsible for people not taking interest in investing in stocks.

When the problem is a combination of various factors the solution also needs to be comprehensive. First, the understanding is required that the Stock market is not a gamble and is the face of multiple organized businesses.

Understanding the truth instead of general perception

Starting from Initial Public Offerings(IPOs) to the businesses raising capital for their expenses, Income statement, cash flows, accounting, a balance sheet that is associated with a normal business, needs to be looked at and have to be understood.

Further regarding the risk that is associated with stocks is present in any business that is to be handled. Even if we start with a grocery store, there are risks associated with marketing, reach to customers, sales, etc.

It is this inherent business risk that is still present with securities but just that we are dealing with multiple businesses when we are diversifying our portfolio and the proportionate risks accordingly.

Also, we can diversify investments with other regular investments like real estate, Deposit, Gold, Sovereign funds, etc to protect ourselves from market dynamics.

If one is willing to make money through business then automatically he/she is ready to accept the inherent risks which are similar to those of the stock market. The only difference is that we are not active participants in the business and on the field when it comes to the stock market.

We are just providing capital to the business and will be a part of the profits once the business is profitable, which applies equally to the losses as well.

Conclusion

So, get rid of the unfounded reasons to avoid the stock market, read about the businesses, gain financial intelligence, and apply your financial IQ in the stocks market to earn. Beware of the get rich quick schemes or scams, apply your mind while making an investment.

The stock market is another investment option and not inherently bad or scary, but it is the greed that is the culprit. Being aware, learning and taking informed decisions would definitely change your opinion on the stock market for good.

Keep Learning. Happy Investing…!!