With reference to the stock market, one can say there are group people who are very much involved and dependent on the stock market, day in and day out. They earn their bread and butter from the stock market. Their whole family depends on the earnings they get from the stock market.
Then there are other groups of people who invest in stock market to increase their wealth. Their principle income is either through jobs or business. For them, share purchase is just an investment vehicle.
Apart from these groups, there are others who do not have much knowledge about the stock market. They think it is a mysterious place, where there is a lot of shouting going on and sometimes there is a lot of jubilation or despair going on. People shouting here and there and signaling one another. The common man is unaware of what is going on inside the stock market. Let take a look at Indian stock market overview and myths surrounding it.
- Place only for the rich and famous
This is one of the most typical myths that a stock market is a place where only rich and famous personalities put their money. Or only those people who have hordes of money can invest in stock market. Once all your paperwork and registration is complete then you can start purchasing stocks, which you can sell it at an appropriate time to make a profit. Share prices are in a range from few rupees to thousands. Similarly, the quantity that you can purchase is from one share to hundreds to thousands to lacs depending on your pocket.
One can start purchasing shares with an as small amount as one hundred rupees and can purchase any day whenever one wishes during working hours. There is no minimum fixed level for stock investment.
- Nothing more than gambling
This is one of the biggest myths that keep investors at bay from approaching stock market. This notion persists with investors or the common man who have no knowledge regarding the difference between gambling and the stock market.
Gambling is pure luck game. Luck can favor you sometimes but cannot favor you all the time. A stock market is about speculation. Speculation is an investment in real estate or stocks or in commodity, in the hope of gain but with a risk of loss. Your ability to purchase/sell right stocks at right time and at the right price so as to profit or loss from it. Luck has virtually no role to play. One can also minimize risk to an extent by taking into consideration certain points. One can take calculated and timely decisions so that risk of loss is less and gain from profit is more.
It is true that many people have riches to rags story in the stock market. It was not because of being unlucky, but because of greed and over expectations. Similarly, it is also true that there are rags to riches story in the stock market. It was not because of being lucky, but because of patience, calculated and timely decisions.
- High price shares will fall and low price shares will rise.
This is also one of the widespread myths that share price which are high today will one day fall and share prices which are low today will one day rise. Actually, those share which are overpriced/underpriced because of rumors, misjudgment, and other things, will on correction of the market will fall/rise. But if a company is potentially strong its price will not fall and those company which is weak, its prices will never rise.
Many factors and ratios are considered while evaluating company’s share price. There were moments when Sensex was at 8000 pts (also at different points) and people said the bubble will burst. But you know where it is today.
- Trading can be done without understanding.
There is a myth that stock trading is nothing but buying and selling of shares. People do jobs or business like an accountant, carpenter, plumber, designer, etc. They gain requisite knowledge over a period of time. While on learning path they face difficulties which they resolve and learn from their problems and shortcomings.
Same thing applies in the stock market. Little understanding is not enough for trading. One does gain knowledge when one is involved, what to be done and what not to be done, observing business tricks of the trades, logical reasoning, applying common sense, calculating, studying patterns and charts, analyzing financial statements, handling difficult situation, figuring out what went wrong and how to correct it and move ahead. This way trading will be more successful and profitable.