Investment in equity market ........

Saturday, February 28, 2009

How wise is it to invest in Equity Market for an small investor, is it worth?

This is the question in every one mind... If you look at any Indian money magazines, it would always advice you to invest you in equity market considering your age and risk taking abilities. It would say, if you are young your equity exposure(share) should be more compared to debt (bank deposits). But then consider this before investing..

  • Share market now adays not just depend on home economic alone. Global economy drives the market. Something bad happens in the western or eastern market, the very next day, India market feels the heat, the reason being panic sets into the market as there are now large number of foriegn players in the Indian stock market. How do you predict world economy is good at any point of time? or how do you predict how the market would be in 3 years down the line.
  • The general advice is that a small investor should be wise enough to read the financial statement of the company before investing in the company. How do you know the financial statment produced are true (even if it is an audited report for example Satyam case)?. Audit is an activity, which generally verifies document produced by the company, it doess not validate whether the transaction really happened. For example, a bank FD may not be validated with the corresponding bank.
  • FII, had invested and took the sensex to range of 21,000 in Jan 2008, before sucking out their money(your money too??) from the market.
  • It is generally said, considering inflation, FD would not even satisfy the inflation factor. But, at the same time I would say for small investor would be sure that on such a day next year he would get 'X' amount if he had put in FD. The same thing cannot be said with equity market.

If you are young, have time, money and risk taking ability , then I believe the best bet would be to have your own entreprise otherwise bank FD might be much safer bet, though interest earned has to be taxed....

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