What is the first thing that comes to your mind when you hear the words, “Stock Market”?
It surely would be the time someone told you a way to make easy money and get rich.
But in reality, that is far from the truth. You should always remember that, “there is no elevator to success, you have to take the stairs.”
Peter Lynch, who was the greatest fund manager from 1977 to 1990, often talks about how important it is to understand stocks before investing. He always emphasizes on the following:
- Knowing the fundamentals of a company.
- He says that a person might get lucky a few times but eventually the market outplays them.
- Always spent time in analyzing company balance sheets and reading thousands of annual reports.
So, in this blog, we will understand everything about the Stock Market to help you decide how convenient a career in Stock Market is.
|Table of Contents|
|What are stocks and a stock market?|
|History of Indian Stock Market|
|Now let us look at the markets today|
|Reasons for Losses by Traders|
|Qualities of a Profitable Investor|
What are stocks and a stock market?
A Stock is a part ownership of the company. These Companies require funds to expand. To source these funds, the company issues equity.
Once you buy those stocks, the company gets the funds and you own a part of the company. The stock market comprises thousands of such companies and the demand-supply for their stocks make their share prices move up and down.
History of Indian Stock Market:
In the year 1978, Sensex had a base price of Rs. 100. Today it is valued at Rs. 36000. This means, in 40 years, a hundred rupees investment is now worth Rs. 36000. In these 40 years India has not just witnessed Covid-19, but the Kargil war, 9/11, recession, tsunami, assassination of prime ministers and many more. No other asset class has come even close to such high returns.
Now let us look at the markets today:
There is little doubt that the year 2020 will never be remembered fondly by most. It’s the year when we were forced to stay indoors and were surrounded with unpleasant news of employee layoffs and rising Covid-19 cases. During all this, there was one industry which was registering new users faster than ever before. It was the stock markets.
Stock brokers across India, have opened up to 3 times more trading accounts then they usually do. There has also been a boom in online stock trading.
This proves that the stock market in India is expanding and the demand for professionals will only increase with time. This creates a huge opportunity for people who want to make a career in the stock market.
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But in spite of such growth of Indian stock markets, you would be surprised to know that the majority of the traders who enter the stock market exit very soon after making losses and never come back.
Reasons for Losses by Traders
- A lack of understanding of the companies behind the stock.
- Trading in the derivatives market, commonly known as the Futures and Options markets without much knowledge.
- Not having a stop loss for all short term trades. People end up holding their positions with losses becoming deeper and deeper.
- Trading in stock markets is a psychological challenge. How you handle your emotions is what differentiates a good trader from a bad one. It is vital to stick to your strategy and not trade simply based on speculation.
But there are also people who have made millions from the markets. It can’t just be all luck as people say right?
The truth is, that they have spent years gathering a lot of knowledge of the financial markets and kept improving from their experiences.
Qualities of a Profitable Investor
- Knowledge of Technical and fundamental analysis of stocks.
- Continuously evolving with the markets by trying new strategies and learning everyday.
- Trying out and implementing new trading strategies after practice through paper trading.
- Having discussions with other successful traders and reading their views from popular forums such as Twitter and Blogs.
- Staying up to date with finance and economic related current topics.
So there should be no doubt in your mind that the stock market career provides a world of opportunities. If not be a trader yourself you can work in 100s of industries. From Asset management companies, insurance, stock brokers to working for multinational Wealth management companies.
But it is for you to decide whether you want to be someone who works on the tips of other people. Or define your own path and make huge profits. The latter only comes with extensive hard work and effort. However, that is a stepping stone to success for any field you work in.