STOCK MARKET INVESTING MYTH BREAKERS

Many friends have commented on one of my earlier write-up titled: “I will buy a new house and then earn rental income on it, this is much better than stock market”

The first point which I would like to highlight is that I respect each and every opinion and try to learn from everyone.

Now, let us move ahead and see the reality why the stock market is a better investment in comparison with any other asset class in India. For the same I request you to please take a look at the following snips. The credits of these snips belong to the respective creators. I have just used them fairly to spread investing knowledge.

Little bit of wealth creation data

Indian equities have seen a strong growth with major indices such as NIFTY 50 and Sensex generating a CAGR of ~10% between FY 2015-2021. Market analysts remain bullish for Indian equities in the long term owing to macroeconomic factors and growth.

The market participation has also been on the rise with the number of demat accounts rising at the rate of ~15% CAGR between FY 2015-FY 2021. COVID-19 accelerated the growth further with ~14 million new demat accounts opened in FY 2021, a ~35% rise in a year.

Despite the strong growth, India capital market penetration (percentage population participating in stock market) stands at only 3% as compared to 55% and 13% in US and China respectively.

Snip 2

Overall mutual fund AUM in India, for individual investors is expected to reach ~ US$ 500 billion by FY 2026 which is currently at ~US$ 224 billion in FY 2021. Digital channels as a mode of investment has picked up pace rapidly contributing 55%-65% of all incremental mutual fund purchases in FY 2021 and is expected to drive 70%- 75% of all incremental purchases by FY 2026. On an overall level digital channels are expected to amount to ~55% of the overall mutual fund AUM by FY 2026.

Now the point which you need to understand is that it is not just about the data but the way you interpret it defines the correct knowledge. To explain the same point let us take this discussion forward in a simple question-answer format. I am sure it will help you in understanding why stocks are a better investment than property, gold etc.

Q1 What are different kinds of assets in India where people invest?

A1 Gold, stocks, fixed deposits, bank savings, local committees, cash etc., These are some of the asset classes in which people in India invest in.

Q2 Ok, then what is an asset in simple terms?

A2 An asset is anything which holds value and helps in the betterment of human civilization in one way or the other. For example, if you work for a company A you are an asset of the company which holds value. Similarly if you hold cash in your hands this only is an asset which holds value in the real world. Then other examples can be Intellectual Property, inventions etc., are all different kinds of assets.

Q3 So what is the division of household wealth in India?

A3 For the same please look at the following snip.

As you can see according to this snip only 4.8% people in India invest in equities. Whereas, nearly 50 percent invest in property, 15% in bank deposits and 15 percent in gold respectively. This totals to around 80% of the total Indian household assets. Then around 10 percent is occupied by pension funds and insurance funds. Thus totaling to around 90%.

Q4 Then why do 55% people in the US and 33% people in the UK invest their money in stocks?

This is because the US and UK are developed nations. Unlike nations like India, Brazil etc which are developing. Financial literacy has percolated to a deeper level in the developed nations mentioned above like the US and UK. Which is not the case with nations like India and Brazil.

Q5 Is this not surprising specially when compared with a nation like India where just around 3 to 5% people only invest in stocks/ equities?

The point here is that India which is a developing nation is now on a somewhat predictable path of becoming a developed nation like the US and UK. Though this will take a few decades for us to reach that developed nation tag. Still, what is to be understood is that as the nation continues to develop and unify financially. So will the way people deal and invest with money.

Due to epic digitalization over the next few decades or so, India will turn digital money, wallets, online transfer of funds, free internet banking etc., as a norm. Just like we have for mobile phones today. This means irrespective of the model. It may not be the most expensive phone in the market. Still, more than half of the population has exposure to mobile phones in India which is going to continue to rise.

Smartphone penetration rate in India 2010-2040

In 2020, the penetration rate of smartphone in India reached 54 percent and was estimated to reach 96 percent in 2040, more than doubled from financial year 2016, when only around 23 percent of the total population were using smartphone.

Q6 Still, what is the reason for this disparity in investing methods today?

See, as I have told you and shared snips and data with you. Just around 3 to 5% people in India participate in the stock market today. In the US this number is 55%. This is because of

• Lack of financial literacy in India.
• India still is a developing nation. US whereas is a developed economy.
• Unwillingness of people to evolve and change dynamically.
• Lack of conceptual clarity on investing.
• No proper means of stock market education in India.
• Myth that property and gold investments are safer.
• Lack of proper understanding of different kinds of asset classes.
• Stubbornness of Indian’s to continue holding property.
• Stubbornness of Indian people to continue believing in myths.
• Stubbornness of Indian stock traders who know stocks but still get wiped out here.

Q7 What does the future holds?

A7 See, irrespective of what I say or write. Today India has just 3% exposure in equities roughly. As India develops we will see the exposure of Indian’s increase towards equities and mutual funds. A few decades later as India moves towards achieving the tag of a developed nation Indian populations exposure to equities will also rise and even cross 40% which is around 15 times from the current level. Obviously this process will be gradual and take its own sweet time.

BUT

Still, the correct path of financial prosperity for any Indian investor today is to quickly invest in good equities and hold them like you hold your gold, property or any other asset class. For example China is at around 14% today.

Therefore, the future is that the share of people in property investments is going to shrink on a decadal basis in India as we go ahead and the share in equity investments is going to rise. This is the normal trajectory of a nations cycle from being a developing to a developed nation.

Q8 Still, why are equities a better investment than gold?

As on an annual basis equities (benchmark index) have outperformed Gold by a handsome margin on a 25 year basis. This can be verified by a simple google search. Still, to begin I am sharing with you a link:

Q9 Then coming to the question of property is it better than stocks as an investment?

See, on this as I have discussed in my earlier write-up. I agree that everyone should have a house. Still, you should not think that you will beat inflation easily by rental yields in India. This just doesn’t happen. Also, I am giving you a general idea here. I am not taking any specific cases.

So if you have a god given house next to the Queens palace in City of Westminster. Well then obviously the dynamics will change for you. What I am saying is that if you are a middle class family person with a 2 or 3 BHK flat in any of the metropolitan cities in India then thinking of beating equities while holding out on a rental yield is not a very good idea. As your yield will give you just 7–8% after taking out all other expenses. This will be way behind what good equities can offer.

Also, in equities in India we have a T+1 settlement period this is rarely the case with property investments. As property investments are ill-liquid and have numerous regulatory limitations. It is due to these reasons only that it is very difficult to sell your landed property or house and secure funds in a day or two.

What's the Difference Between Real Estate and Stock Investments?

Therefore, to sum up with this write-up I would like to highlight that every person has different circumstances and visions towards life. Also, there are no rights and wrongs in investing. It is only about having the correct knowledge. So, I hope this gives future investors some food for thought and helps them in a constructive way with investing.

Disclaimer: Views expressed are personal. Stocks discussed are all a part of my portfolio. Please don’t invest in any asset classes based on just my write-ups. Take my articles for informational and educational purposes only. Before investing please consult a SEBI registered investment adviser. Finally, all links and snips used in this article are used fairly. The credit goes to the respective creators.

Total Indian population as per latest census report is

The two largest demat service providers in India are CDSL and NSDL.

As per the latest stats from NSDL, total active investors in India are - 16865433

And as per CDSL, total active investors in India are -14415675

So in total, approx 3 Crores Indians invest in Stock Market. Our total population is more than 130 crores.

Less than 2.5% of Indian population invest in Stock Market. Compared to other nations, we have a long way to go. And i strongly believe, this will only increase as the days pass on.

source:

https://www.cdslindia.com/aboutcdsl/cdsl-today.aspx

NSDL

If we calculate in terms of percentage who directly invest in stock market, it’s less than 1% of total population and if we calculate direct and indirect both, it may reach to 2 to 3% only. Indirectly means investments through Mutual funds, LICs and other similar investments available in India.

I have been trading and investing in stock market from more than a decade. I am living in Mumbai which is a hub of stock market and most of the companies’ head quarters. I have felt and watched stock market very closely because my father was in Dalal street from where stock market of India begun.

Scenario of stock market investments is changing day by day. Digitization is helping people to grab knowledge about stock market. Let’s take an example about Quora only. Quora was nowhere before few years but popularity of Quora is increasing day by day and people are interacting, grabbing knowledge and learning good things through Quora. This is just because of digitization happening in India.

Percentage of people is increasing who are investing in stock market directly or indirectly. Indirectly means thorough Mutual funds and other fund sources. Before 5 years, very few people are aware about mutual funds but nowadays investment in mutual funds increased rapidly.

Still there is lesser people out of 130 crore population in India who invest in stock market. I am giving best possible reasons behind that:

1. Fear of Loss: First and foremost thing which we hear from most of the people is hear of loss. We heard about people’s loosing stories only and due to that most of the surrounding people try to avoid investing in stock market. People invest in stock market without having proper knowledge, guidance or skill and they loose their entire capital which leads them to make others negative stating that stock market gives losses only.
2. Lack of knowledge: In India, there are hardly 1% of people who actually wants to study and learn about stock market. Others just want to gamble which leads them to losses only. Most of the traders starts their journey with small capital and intraday trading which is more or less suicidal only if you don’t have sufficient knowledge.
3. Investments coming through major cities only: Everyone knows our 60% to 70% population is in villages and small towns only who don't know anything about stock market and others are judgemental who thinks that they are not qualified or capable enough to understand this. So major investments in stock market coming through metros and other cities only.
4. Lack of patience and skill: Educated and qualified people start investing in stock market but they don’t have sufficient skill or knowledge so they but some random stocks at very high point by listening through TV shows or reading newspaper which gives them initial losses and they don't have patience to hold so they book losses and quit stock market and tell others about their loss stories.
5. Poor service from Advisories and brokers: We are well aware about advisory scams, frauds and online cheating while taking services from different advisory companies or so called Facebook pages, whatsapp services and telegram channels. Due to their cheats and frauds, many people have to leave this stock market. Sometimes brokers are also trap innocent investors to generate their brokerage.
1. If you need a reliable advisory or researchers, I would advice you to go with Equitics Global Research. I have personally been taking their service and can vouch for it. You can check out my previous answers for more details.
6. Lack of education in India: We are aware about our literacy rate which is also a major reason why people are not investing in stock market. We have farmers, labours, workers in major percentage who are totally unaware about investment in stock market. They just know only hard work. Countries like Singapore, US, Canada, Japan have more percentages of investors because they have educated and migrated people which are skilled and talented.

So these are primary reasons for lesser investments in stock market in India. But I can say that it’s increasing day by day. Platforms like Quora also playing a big role. Our stock market is stable and strong compared to other world markets. Our economy is doing well. Government reforms are also helping stock market to remain strong and bullish and I am optimist about future percentages of investors in India.

Recently I got this notification

With this alert, I have reached this question.

You can find this information in depositary services (who provides Demat services). Irrespective of where you create your Demat account, someone like CDSL and NSDL tracks your Demat accounts.

Suppose you create a Demat account in Zerodha (Trading platform), the Demat account is provided by CDSL.

So let's analyze by looking into their websites.

CDSL: ~ 4 crore

NSDL :

~2.3 crores.

A total of 6.5 crores people are investing in the stock market (includes passive and active investors). This can’t be a fake number. But there are some loopholes such as people create an account but they can’t trade or do anything.

Finally ~6.5 crores Demat accounts

India's population should be around ~150 crores.

so approximately around 4.3% of the Indian population is investing in Indian stock markets.

Note: This information is up to date by June 30, 2021

As compared to rest of the developed countries it is very low.

Overall, only 7.4% of India are registered BSE investors. But according to a report by the Securities and Exchange Board of India (SEBI), only around 2% of India's population actively participates in the stock market. This is a relatively low percentage compared to other countries, but it has been gradually increasing in recent years due to increased awareness and access to information about the stock market.The number of demat accounts in India have crossed the 10 crore mark for the first time. While it took the Bombay Stock Exchange more than 12 years to get to the first five crore investor mark, the next five crore investors joined in less than two years. I hope it will increase further.

The number us low because of lack of financial education.

• According to a survey conducted by the National Stock Exchange (NSE) in 2019, only 4% of the Indian population invests in the stock market.
• This is a relatively low percentage compared to other countries such as the United States, where over 50% of the population invests in stocks.
• The low percentage of stock market investors in India can be attributed to factors such as low financial literacy, lack of access to investment opportunities, and cultural attitudes towards investing.
• However, there has been a recent surge in interest in the stock market among young, tech-savvy investors in India, fueled in part by the rise of online trading platforms and social media.
• Despite this, the overall percentage of Indian population investing in the stock market remains relatively low.

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% of population of Overall indian people, only 7.4% of India are registered BSE investors.

The number of demat accounts in India have crossed the 10 crore mark for the first time. A demat account is similar to a bank account, but is used for holding shares and securities in an electronic format. It helps avoid handling shares physically. While it took the Bombay Stock Exchange more than 12 years to get to the first five crore investor mark, the next five crore investors joined in less than two years. About 30% of these accounts are from Maharashtra and Gujarat. However, as a share of the population, only over 7% are registered BSE investors, with double-digit penetration being seen in just four States. Interestingly, the growth in investors in the recent past has been more pronounced in other parts of India, particularly the Northeast, indicating an increasing interest in investing in stocks.

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Total population of india as per latest report (2022) is 141.72 crores

There are two largest demat account service provider in India

1. CDSL
2. NSDL

As per latest report (30/04/2024) from CDSL, total active investor in India are 11,83,91,409 (11 crores 83 lakhs 91 thousand 409)

As per latest report (30/04/2024) from NSDL, total active investor in India are 3,60,57,704 (3 crores 60 lakhs 57 thousand 704)

Total number of investors 3,60,57,704 + 11,83,91,409 = 15,44,49,113 (15 crores 44 lakhs 49 thousand 113) and

Total number of indian population is 141,72,00,000

So, percentage is 15,44,49,113 / 141,72,00,000)*100 = 10.898%

So in total approx 11% of Indian population invest in Stock Market.

According to data from the National stock exchange (NSE), there are 1.2 crore active investors in India, a country of 138 crore people, as of August 2021. Even though this number is rising and better from the previous data, investing in stock markets still remains as a stigma for many. From our generally conservative attitude to lack of proper knowledge about stock markets, reasons could be many. Let’s try and understand why most Indians hesitate to invest in the stock market.

5 Reasons why most Indians do not invest in stocks

• Lack of proper financial literacy
• Conservative attitude
• Preferences towards physical assets like gold
• Lack of trust
• Lack of capital

If you want to learn more about the stocks market strategy and hedging strategies then you can go with welfra Investment (follow them on Instagram and quora also.

Now, let’s see some reasons why you should invest in stock markets.

Reasons to invest in stock market

1. It gives you an alternative source of Income
2. Investing is easy now.

There is no better time to invest in stocks than now. If you are someone who wants to invest in stocks but is reluctant due to any reason, worry not – investing in stocks is a time-tested and proven investment method. If you need guidance, you can always take the help of a financial advisor as well. Don’t wait too long, the opportunity won’t wait! Happy investing!

Kindly check our profile to connect with us and to Build Your Wealth Wisely with Welfra Investments.

The proportion of retail investors in India’s equities markets is strikingly low. Less than 1.5 percent of the population invests in securities, compared with almost 10 percent in China and 18 percent in the U.S. Just 2 percent of India’s household savings are exposed to equity; in the U.S., the long-term average is 45 percent.

This is ultimately bad news for India’s economy. The country desperately needs to channel more household savings into equities -- which are a vital source of corporate finance -- and away from unproductive investments in gold and real estate. India also needs more local funds if it's to sustain the strength in its equities market while avoiding macroeconomic imbalances. At the moment, around 70 percent of the market is dominated by foreign institutional investors.

Consider this statistic. Between September 2008 and October 2014, those foreign investors made net purchases of $45 billion. In the same period, domestic institutional investors (mostly funded by retail investors) made net sales of $16 billion. This imbalance creates serious side effects. The billions of dollars flowing in produce upward pressure on the rupee and a decline in India’s competitiveness. When they flow out, usually at short notice, markets collapse and the exchange rate grows volatile.

Source : Opinion | India's Missing Investors

At three percent, merely a fraction of India's population is invested into stock markets, lagging far behind the USA because in India the major growing population that is youth is not aware of it. there is also a major problem is unemployment as a fact that in India population of engaging stock market is less but things are changing I must suggest the people who is getting fixed source of money by job or rent or from anywhere must invest in stock market. Here is the tip : don't lose hope don't stop learning.

For starting I must suggest you to follow this amazing feed “ stock market savvy” where you can learn and exlorer about stock market more efficiently.

Have a nice day 😊.

There are two ways by which individuals can invest in stock Markets.

Directly or through what we called “managed funds”.

Direct investments in stocks markets can be through two routes i.e. IPOs or Secondary markets.

Managed funds investment would constitute Investments in Equity of Balanced Mutual funds, Investments in ULIPs and other Insurance related plans, NPS etc.

You can read my views on Direct versus Equity mutual fund investments here.

Vivek Agarwal's answer to Should I invest in stocks or mutual funds?

Around 1.5 crores to 2 crores individuals own stocks in India, while another 1.5 - 2 crores invest in Mutual Funds, ULIPs, NPS etc

So all in all, the stock Ownership in India is not more than 2.5-3% of the total population.

This is a very small number if you compare the same with more developed nations.

As per some surveys, around 52% Americans owned shares in 2016. This number was as high as 65% in 2007.

In developed markets, Majority of the stock ownership comes through Managed funds or through Investment Advisers. This is appreciable and inline with my views on how common investor must take exposure to equity.

But one thing is certain to me that more and more retail investors across India would increase their exposure to stocks. I just hope that they do it in the right way and increase their wealth.

I think this one is tough but i am trying… According to survey highest demat account opening was there in year 2008 but the record was put down in 2016 with 2.4 million new account opening, However around 23% of total demat account in 2016 are active in rest CDSL and NSDL has not seen transactions.

Further, according to business standard there was total 23.30 million demat account in 2015 and as per mint there was 2.4 million new demat account opening so, we can say that there is total 25.70 million demat accounts which is around 2–3% of the total population.

Disclaimer: data is not at all accurate it just based on few readings.