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Why do people fear to invest in the stock market?
1] The volatility
You see, stock market is a very inconsistent place. There are indices. There are stocks. They go up and then they come down and people who are new, fail to cope up with this volatility.
Every year from 2007 to 2017 NIFTY has shown a major move from its lows. To make it simple, one can easily get that such huge gap between the lows and the highs depict the volatility of stock market.
2] Test of patience
Stock market tests your patience.
Moreover, the law of demand fails in short term as well. If the market is going up, people start to chase the momentum and it goes further up. On the other hand, if the market comes down, they start to sell in panic and it comes down again.
3] Lack of knowledge
A layman with no knowledge will fear to put his money on stake.
Also the number of people making money from the market are very less as compared to the number of people losing their money. This creates a negative psychological impact in the minds of new entrants that stock market is a highly dangerous place and hence they stay away from it.
here are hence two choices.
- One to remain a mediocre investor and put the money in a fixed deposit and to stay risk free and hear the stories of Buffets and Jhunjhunwalas.
- The other to take the risk and invest the money in market and lose the money then learn from it and then win again and tell your money making stories to others.
To sum up, people can not bear such volatility and inconsistency. They want steady returns. Moreover, they want peace. Hence investing in stock market and watching it go up and then come down again is not everyone’s cup of tea. These are the same people who will go for slow yet steady fixed deposit investments.
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