Hi Investors. Today we are going to discuss why most Indians do not invest in stocks. So, let’s get started!!
I was recently talking with one of my friends, Gaurav who works in a big multinational company. Gaurav didn’t know that nifty has reached its all-time high until I told him so.
later the same day during lunch, when I informed one of my colleagues, Ashish, that nifty has crossed 17.5k points, he didn’t show any sign of excitement or interest. In reality, most Indians are like Gaurav and Ashish. They have little or next to zero knowledge/information of the stock market.
When Mr Narendra Modi became the prime minister of India in May 2014, the whole of India including the stock market, seemed to roar. The NSE index nifty has given an astonishing return of over 110% since the coming of PM Modi in the central government.
Although the stock market has welcomed our PM with a bullish trend, however, it didn’t seem to motivate the participation of common people in the market as much as anticipated.
In India, around 98% population has nothing invested in the stock market. Hardly 2% population of Indians invests in the market with the majority of only two states: Gujarat & Maharastra, out of 29 states.
If we compare the participation of the common people in the stock market around the world, we can find that India’s participation percentage is even below the average. In China, around 10% population of the common people participates in the stock market. Further, in the USA, this percentage is as high as 18%.
Nevertheless, what really worries about the participation of Indian investors in the market is its minimal growth. The percentage of investors participating in the market currently, is the same as 3 decades earlier (in the 1990s). The governing bodies have not been able to attract more retail investors to invest in the equity market.
Even in 2021, stock market investing is considered as the rich guy’s game. Most of the retailers who invest in stocks are bankers, businessmen, engineers, lawyers etc, whose average monthly income are in six figures.
Indian stock market is over 140 years old and still, people are searching for reasons that why most Indians do not invest in stocks. In this post, we are going to give 9 common reasons why most Indians do not invest in stocks. Make sure that none is stopping you from investing in the Indian stock market.
Further, please mention in the comment box which reason you think is mostly responsible for less participation of common people in the Indian stock market.
9 Reasons why most Indians do not invest in stocks
1. Lack of awareness
Many people are unaware of stock investing. They do not know how much returns they can get by investing in the stock market. A common villager doesn’t know how to earn from stocks and doesn’t understand the power of compounding.
A local retail shop owner does not know what is a Demat and trading account. An old small town electrician hasn’t ever met an investor or trader in his entire life.
This is all because of a lack of awareness. In short, unawareness is one of the biggest reasons why most Indians do not invest in stocks.
2. Common Investing myths in India
Since childhood, everyone hears about how his uncle/cousin/neighbour etc who has lost his entire fortune in the stock market. Stock market investing is considered gambling in India.
Many people do not invest in the market because they follow the famous investing myths prevailing in society.
A few of the famous stock market myths which stops a common person from investing in stocks are:
- Investors who invest on their own are intelligently gifted.
- Paying a profession is better than making your own investing decisions
- Investing on your own is very risky etc.
Related post: 7 Most Common Stock Investing Myths.
These myths are the biggest barrier to common people and the stock market and a reason why most Indians do not invest in stocks.
3. Not willing to take the risk
The risk is always involved in the stock market no matter how many studies you have done and how fundamentally strong the company is. Most of the conservative Indians are not willing to take a risk on their hard-earned money and consider a 4% return from the savings account as safe.
They will only invest if they are assured that their investment is 100% risk-free, which the stock market never is. The risks involved in the market stop these people from investing in stocks.
Also read: Is Indian stock market Risky to Invest?
However, one always has to take some risks in order to get some reward. Remember- ‘No Risk, no reward’. Further, there is a famous quote by Warren Buffett that I would like to quote here:
‘Stock market investing is about minimising risks, not avoiding it.’
4. Lack of knowledge/guidance
There is also a segment of people who are willing to invest in the stock market but are unable to invest because of a lack of knowledge or proper guidance.
They do not know where to start. There is no proper platform for these people to learn about stock market investing. Lack of knowledge stops these segments of people from investing in the Indian stock market.
5. No security in exchanges
There are a number of past scams in the market. The Indian stock market has got a bad name due to scandals like that of Harshad Mehta and Ketan Parekh. An Even big company like ‘SATYAM’ was involved in frauds and looting their investors.
Although after coming to SEBI (Securities exchange board of India), these scams numbers have reduced. However, there are still many fraudsters present in the Indian market who tends to make money by cheating innocent investors.
Because of the lack of proper securities in the market, many common people tend to stay away from the market. And this is one of the key reasons why most Indians do not invest in stocks.
6. No proper courses
There are very few dedicated courses on the stock market. Although NSE and BSE provide few certificate courses, that’s not even close to fulfilling the requirements of the interested aspirants.
Even many MBA, BBA, or BCOM degrees don’t have proper courses on investing/trading.
7. Lack of capital
In 2012, the Indian government stated that 22% of the Indian population is below its official poverty limit. The latest poverty line is targeted at Rs 32 in villages, Rs 47 in cities. Read more here.
When a majority of the population are struggling to meet even the basic needs of life, there it’s logical that the percentage of people with surplus cash to invest will be very less. Lack of capital is a major reason why most Indians do not invest in stocks.
“I don’t have time” – a common statement among the 9-to-5 working people in India, unwilling to take charge of their financial future.
A majority of the population are either too busy in their day job or are ignorant towards investing. They always delay investing in the market, considering they will do so in future. This unwillingness or laziness among the people is a big reason for the less participation of Indians in the stock market.
9. Preference towards physical assets like land, gold etc
People still have a love for gold, lands, FDs etc. Many people consider investing in Real Estate, gold etc easier in India compared to paper assets, as this has been traditionally followed.
Investing in land in your village, or buying gold jewellery from your local jeweller shop seems simple compared to opening a trading account which will further require the access to internet, computers etc. The natural tendency of Indians towards physical assets is a big rationale for poor participation in the stock market.
There are many people who enter the market just to try their luck. Once these people lose money in stocks, they practically leave the market forever. These inappropriate ways of investing reduce the total number of active investors/traders in India.
Although, there are a few other reasons also like lack of accessibility, low earning of people, volatility etc, however, the main points are covered in the post.
That’s all. We hope this post on ‘#9 Reasons why most Indians do not invest in stocks’ is useful to the readers.
Further, if there is any other reason which is stopping you from investing in the Indian stock market, do comment below.
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