More people are showing interest in investing directly in the stock markets ever since the pandemic started. According to the data of India’s largest stock market broker Zerodha, the Demat account opening numbers for the first five months of 2020 surpassed the total client growth figures of 2019. The brokerage got over 750,000 new accounts since the end of February. Many people looked at the stock market correction in February and March as a good opportunity to invest directly in the stock market. The main reason for this growth in investors is because of the low-priced stocks which new investors look up to as a way to enter the stock market at a lower cost. The low-interest rates on deposits in banks also contributed to this. As companies have shifted to work from home, this allowed the people some extra time to handle their personal finance and investment decisions.
If you are investing for the first time and is risk-averse, then investing directly into the stock market won’t be feasible for you. Such a person could go for the following options;
Research and analysis are required to help you in picking the right stocks. Before one starts to invest, it is important to understand the basics of equity investments such as risk-reward ratio, how to analyze the financial reports of a company, different types of shares, methods of investing, diversification, and so on. This requires putting a lot of time in understanding these financial concepts first to have the necessary knowledge and secondly to implement it. Most investors may not get enough time to gather information about the companies they want to invest in and may not be able to monitor their portfolios constantly.
This will bring a hindrance to taking timely actions, as stock markets fluctuate in seconds. Thereby such people should go for mutual funds as they are run by professional fund managers whose full-time job is to choose suitable stocks. Mutual funds also provide the opportunity to invest in a basket of stocks instead of only a handful of them. Compared to the benefits the management charges are reasonable. Mutual funds are controlled by SEBI that acts in the best interest of investors.
Seek professional help
An investor must define his financial goals, determine risk tolerance, and have an investment horizon to create an investment plan that is best suited for him. There are over 2500 mutual fund schemes now. An investor may not get enough time to do proper research on the performance of various mutual funds and the kind of stock they want to invest. Guidance can be availed from a fee-only financial planner or an investment advisor registered under SEBI.