Why Do Most Indians Not Invest In The Stock Markets?

Why Do Most Indians Not Invest In The Stock Markets?

by 5paisa Research Team Last Updated: Dec 09, 2022 - 09:20 pm 186.3k Views
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Indians have a love-hate relationship with the stock markets. Research shows that only 2% of the Indian investors invest in the stock markets. The average person’s view on staying away from stocks is because the equity markets have not been able to guarantee the same level of trust that other forms of investment provide (read: fixed deposits). Moreover, financial illiteracy prompts investors to prefer traditional methods of investment that give sure shot returns. Other reasons could be:

Reasons For Staying Away-

  1. Financial Illiteracy

    Having little or no knowledge about the stock markets keeps investors away from it. The common belief that “it is a place where you invest only to lose” should be cast away. Education in commerce has also failed to give proper insights and gain the trust of investors.

  2. Lack Of Money

    Lack of money often keeps investors away from the stock markets. It is a common belief that investing in stocks requires huge money. However, you can start with small amounts too provided you do your research and then invest in a stock.

  3. Patience

    Indians lack patience when it comes to the stock markets. Most believe that it is a place to make quick money. Lack of patience usually results in investors either entering or exiting a trade at the wrong time. Such premature decisions mostly end up against the investors.

  4. Traditional Investments

    Compared to the stock markets, traditional method of investments like bank FDs, certificates, and gold give sure shot returns. People do not have the time to study a stock and invest accordingly. So investing in traditional, risk-free instruments is preferred by most of India’s middle-class population.

  5. Past Experience

    If an investor has suffered losses in the stock markets because of wrong investments in the past, they would generally tend to keep away from it. Instead of analyzing the reasons for failure, the investor will find it safer to keep away and make investments in another form.

  6. Lack Of Courage

    Because of a fear of losing money, investors do not show courage while making investments in stocks. Also, the “bad” stock market experiences of people near to us are a big demotivation.

  7. 'Play Safe’ Attitude

    When it comes to investments, the risk appetite of Indians is not that high. Therefore, fixed deposits are the sure-shot, go-to bets for most Indians despite the stock market giving higher returns.

  8. Word Of Advice

    Elders in India like to guide and motivate their young ones about investing money. However, they are also unable to comprehend the stock markets and, hence, are cautious about investing there. According to them, it is not a safe place to invest one’s hard-earned money. This keeps most young investors away from the stock markets.

Today, there is a big disconnect between the Indian stock markets and the Indian investors. The reason for this is lack of awareness, anxiety about risk, high returns, and a need for risk-free investments that give stable returns. This affects investors’ earning capabilities and the benefits that they can reap in the long run.

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