I will talk about the behaviour aspect of trading. Do you feel that increased smartphone usage has also resulted in increased trading activity?
Undoubtedly, the smartphone and lower data charges have dramatically improved our lives in many ways, with stock trading being a classic example.
Everything related to trading can be managed through this device: placing the order, fund transfer, technical analysis, financial information, tracking the positions, and keeping alerts.
You name it; it’s there. With market access on the go, it is easy to trade during trading hours from anywhere in the world.
No wonder the smartphone has managed to create a sort of hook resulting in increased trading activity.
This is pretty evident from BSE data that reveals cash market turnover from mobile phones jumped from 5.3% in June 2019 to 18.7% in June 2022.
The share of mobile trading on the NSE for June 2022 stood at 19.5%. Internet-based trading gained significant momentum during the nationwide lockdown in March 2020, and there has been no stopping since then.
And add to these the near-zero brokerage plans the discount broking houses offer!
Many channels on WhatsApp or Telegram have been partly responsible for spreading false promises of guaranteed returns. Do you think in this age of social media where millennials are hooked on these platforms have a role to play in misguiding?
Unfortunately, what you mentioned is true. The new age channels of communication and information dissemination like WhatsApp and telegram have been misused to spread false promises of guaranteed returns.
Social media is inundated with stock trades that promise jackpots in minutes. And there is a ready audience that is susceptible to such messages.
What amuses me the most are the creative and innovative ways of conveying messages that seem to make money-making in stock markets a child’s play.
To my mind, buyer beware applies to social media ads and messages as well. Stock market investment is no shortcut to making money and warrants due diligence.
It pays to be associated with authentic brokerage houses and join their official WhatsApp handles and Telegram groups, where they share information that leads to intelligent decision-making backed by research.
Should one directly invest in stock markets, especially if someone who is in college or just made an account with a discount broking firm?
Any investor, be it a college student or someone else, must put his/her money in stocks after thorough research and analysis. Investing in stock markets is alright if one has done complete homework.
Besides, one should have the time and expertise to track the market. For newbies especially, I would recommend investing in equity mutual funds.
What are the risks associated with investing directly in a stock market?
Let us first understand what it takes to invest directly in the equity market. Well, one needs to be a good stock picker –know which stock to buy from which sector and when to sell.
This will require studying the company in detail: understanding the business, its competition, business opportunity, risk of competition, and quality of management. Besides, one must keep updating the company’s progress constantly.
This is a time-consuming process for sure. Imagine doing this for other companies in the portfolio. Also, an individual investor will have limited skills in researching many companies.
Besides, one must keep a tab on the sector, economy, and geopolitical events, among others, as these too impact the market and, consequently, the portfolio.
Failing to devote time and take the right action at the appropriate time can result in portfolio underperformance and even losses in some trades.
While these risks are real, they can be mitigated by reading brokerage research reports. Again, this requires investors’ time and expertise to understand and act on the same.
Every young investor has a dream of becoming a crorepati – can they fulfill it by investing in stock markets – directly or via MFs?
I agree everyone aspires to be a ‘crorepati.’ No wonder Kaun Banega Crorepati’s first season captured every Indian’s imagination. The crorepati dream is intense, and many young investors turn to the stock market in hopes of achieving it; in many ways, it is the right place to generate wealth, provided one follows the rules of the game.
Whether one invests directly or through mutual funds, patience and discipline are the two virtues of successful stock investing.
As was discussed earlier, direct investing requires time and expertise to pick and sell the right stock at the right time. Mutual funds offer a more hands-off approach but may not provide the same potential for growth as direct investment.
If someone invests just Rs 10,000 per month for the next 20 years with 12% return can take you to the crorepati mark. The whole compounding impact has a significant impact on the final outcome.