“Be fearful when others are greedy
And greedy when others are fearful”
– warren buffet.
This might be tough time for Indian economy but it is the best time to invest in share market , specially in index funds.
You might be hearing news about economy going down, growth rate expected to come below 1% and share market losing points. But hold on, this is the time, because price of share at the lowest . Shares that you buy for 100 rupees today can be worth 200 when everything comes to normal after corona pandemic.
Many people fear from share market. But if you research and understand about it, you will know how simple and profitable it is. This blog is all about that-
“The basic of share market”
What is share market?
Share market is a kind of market in which you can actually buy or sell shares. Now what is shares? A share is the partial ownership of any company. For example- If you buy 2% of FB, you will be owner of 2% of FB. That means if company is earning 1 lakh of profit, you can have 2% share of that profit(depending on company’s rule).
History of share market.
Buying and selling shares of company started in 1600s main European company like Dutch East India Company and British East India Company started trading of the spices, gold , silk around the globe. These companies did not had a lot of money to invest in ships and other stuff to increase their trading. So these companies opened them to everyone.Now , anyone could have invested in ships and in return they would get some shares of the goods that ship has brought. it was not profitable to invest in anyone ship as there was high chance that if ship get sunk , all their money could have also sunk. So traders used to invest some money in ship and some in other .
Through opening the shares to everyone , company got a lot of investment. And this was profitable to both people/ investor and company. This idea was super good that’s why in modern time every country has its share market in which anyone can invest by buying shares.
Share market in India
share market is getting popular in India. number of people investing in share market are increasing rapidly.
India has 2 stock exchange buildings from where you can sell and buy shares of registered company. They are –
Mumbai stock exchange
National stock exchange
Mumbai stock exchange is the 10th largest stock exchange in the world, with the overall market capitalization of $2.2 trillion. It has over 5,000 companies registered in it.
But buying shares of any of these companies seem very complicated. Because it is very unpredictable which company is going to perform good or bad in future.
But after the arrival of the index fund, share market becomes much more easier to understand.
Index funds put your money in different indices(Sensex, Nifty). Rather than buying shares in particular company, now you are buying shares of only best performing companies.
For example, if you invest 100 rupees in Sensex index fund, you are buying shares of top 30 best-performing companies in Bombay stock exchange. Now, if some company ( lets say Renault) is performing bad in 2020, it would not be in top 30 companies, so your money will automatically be taken out of the Renault and invested in top 30 companies of 2020.
The chances of losing money in index fund is very less because index funds depend on country’s growth rate which, one day or another is going to increase.
Sensex index fund.
The Sensex graph will make you understand; why it is the best time to invest in the Sensex index fund.
This graph shows time versus points. Here time is the year and points show the value of money.
In simple words, if someone would have invested 780 rupees in 1990, it would have been 20,600 in January 2008. That means in 18 years your money would have been increased by approx 27 times.
There is a dip in December 2008 (because of great recession). And if you look at the value of the money, it is 9300. That means if you would have invested 9300 rupees in December 2008, it would have been 41000 in Jan 2020. That means your money would have increased by approx 4.5 times.
The best thing about this graph is no matter how many economic recession (dip in the graph) comes, it always keeps on increasing. That’s mean your money will always increase and this happens because Sensex index fund only invests in top 30 best performing companies.
There is again a dip in graph in March 2020(because of coronavirus).
And that’s why it is best time to invest.