Investing for Equities: Common Roadblocks and How to Navigate Them
Equities are one of the essential products in any portfolio to grow wealth over time. When you own equity, you own a piece of an enterprise, and how the business performs directly translates to the stock price.
Even if you do not have particular affection toward the stock market or stock prices but still find some way to invest your money in local businesses around you, it still counts as your exposure to equities.
But since I cannot provide a guide on how to build businesses locally, let’s focus on the more general trend, the listed stocks on any stock market.
Investing in equities is one of the easiest ways to grow wealth. You can either become an active investor or a passive investor and still enjoy the fruits of it. But the problem here is not many people still opt for it.
Many of the population is still clinging to the old form of saving and investing. The go-to product for these individuals is a Fixed Deposit. Although Fixed Deposits are necessary products and are helpful in many forms but beyond a point, it is of no value.
Some roadblocks exist between them and the opportunity that awaits them to make money.
We will learn about these common roadblocks in this article.
Not having equity exposure is not always the problem. Some people do invest in equities, but that is through some guaranteed plans. As we have already shown you the True Returns of Any Guaranteed Plans, I need not revisit that topic.
So why don’t people take a direct approach and invest directly in equities or even mutual funds?
Some of the possible reasons I feel are:
1) Lack Of Knowledge: In many times, you will hear an excuse that they do not know about investing in such products, and they are right too. But here we are talking about your future. You do have to learn about these things, and most of the time is more common sense than mathematical evaluations.
But the best part is it is a one-time investment. Whatever you learn will be with you. With the same knowledge, you can earn much more than you otherwise would.
Taking this step is too crucial. You cannot afford to do otherwise.
Solution: Go to Varsity, a Zerodha product that offers you a complete guide on investing. You can choose an active or passive method according to your lifestyle.
Read some educational articles on related topics, and try to find answers to your doubts. Consult with people who already do investing and discuss the pros and cons with them.
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2) Fear & Emotions: People do not invest in the stock market due to the fear of losing money. The lack of knowledge they already have grows on them to think of the stock market as a casino. People think of it as selecting random numbers and winning big. They are not aware that behind every stock is a company. The better the company performs, the higher the chances for the prices to increase.
People are also skeptical about losing money in the market. They fear handing money over to something new, which they have no idea of. This fear is quite genuine, but once you understand the basics of investing, all of this becomes clear.
Solution: Find out and study your future needs and financial requirements. We have written an article, which we feel might be of help. Analyze whether your finances can remain solid, even without investing in stocks. If yes, then kudos to you. But a very minute population can find themselves fully satisfied without investing.
3) Lack of Money: One of the most heard reasons and a very easy excuse for people not wanting to invest is lack of money. Many of us believe we need high investment to make large profits. But these people don’t consider that even when a small amount gets invested regularly, it converts into a large sum with the help of compound interest. The crucial point is to begin your investment journey. Nowadays, you can invest for as low as ₹100. Even new companies are cropping up, allowing you to invest as low as Rs 10.
You can pick the right investment product, such as any mutual or index fund, and invest your money successfully.
Bring your finances in order and develop the correct cash flow for yourself. Assign the invested amount to any products you feel are right for you. Invest the money within a day or two after doing the previous step.
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4) Lack Of Patience: When investing is done right, it reaps immense rewards. But for it to come to fruition, you need a lot of common sense and, even more than that, patience.
Sometimes, even emergency crops up, and even when people have other avenues to look for money, they dive into their investments and sell them. Although, there are situations that you cannot avoid.
For such situations, one must be ready by making sufficient emergency funds so that one does not withdraw the investments and hamper the future.
For the money to compound significantly, your invested amount must be untouched over the years. The compound is synonymous with magic when it comes to investing. So pick a product and keep investing in it.
Solution: Increase your knowledge about compound interest and how it works in investing. You can check the following article to help you understand more about this magic.
5) Not Rebalancing The Portfolio: The only purpose of the investments anyone makes is to look after the needs. Usually, when investing in the early years, greater equity exposure is preferred to grow the value using compounding. As the investor ages, the person should increase the debt exposure as they are relatively safer and less volatile. Moreover, your capability to earn will reduce as you age. Therefore you have to make sure you protect your invested amount.
Solution: Learn about your ideal equity exposure according to your age and other important factors, such as if you have any immediate purchases or big spending. As you grow old, rather than selling the equity unless it has grown, invest more in the debt side of your portfolio.
Learn about various instruments in equity and debt and choose what suits you best.
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Investing is an important aspect. It allows your money to work for you. When done with patience, it can reap huge benefits. Do not get swayed by such excuses because, in the end, it is only affecting you and nobody else. Therefore, plan for the future and decide how to start investing habits early and safely.