In years past, there has often been a perception that Indian consumers prefer to invest in physical goods as opposed to digital holdings. Indeed, it has long been true that assets such as real estate properties and gold have often made up large percentages of Indian investment portfolios. Of late, however, there has been a distinct shift. Early this year, a search trend study revealed that India has become the second-most “stock-obsessed” country in the world, with the number of stock-related searches in the country trailing only those in Singapore. “Stock market” and “swing trading” were among the common search terms that helped Indian interest outstrip even that of the United States or the United Kingdom.
The increasing interest in stock markets among Indian consumers has also become visible in savings-related data. In 2022, the share of stocks among total savings by Indians was measured at 4.8%, up from 4.3% in March of 2021 –– which had been the highest percentage since 2008. These numbers reveal clearly that Indian consumers are devoting a larger share of their savings to market investment than at any point in recent history.
Various sources have attributed this spike in share market investment to a combination of factors, including COVID-19, growing youth populations, and the general rise and ease of online trading. For its part, the pandemic drove many people into financial hardship and confined them to their homes at the same time. This led many to seek out alternative income streams they could pursue from home, with market investment sometimes emerging as a viable option. At the same time, many from the millennial and Gen Z generations dipped their toes into investment for the first time and found simple, intuitive options in the market investment apps that are now so readily available.
In theory, a greater focus on stock market trading, and online market trading specifically, is a good thing. It provides a convenient means by which Indian consumers can diversify their savings and plan for their financial futures. There are, however, some potential pitfalls when it comes to modern online methods of share market investment. Consider the following, for instance:
As was pointed out in one article specifically about the rising prevalence of investment apps, one common pitfall is “jumping headfirst.” The article pointed out that these apps are available for free and that their advertisements “make it sound like investment is a piece of cake.” This is true insofar as the apps make the actual process of buying and storing shares simpler than it ever has been. The consequence of this convenience, however, is that it can lead some newcomers or inexperienced investors to start buying up assets before they are properly prepared.
Misplaced Trust
Lots of the mobile apps and online platforms that have made share market investment so readily available to Indian consumers also offer built-in, automated tips and advice. These are, no doubt, appealing features – and in some cases, they can directly benefit investors. At the same time, though, they sometimes offer generic advice that may not be appropriately tailored to a given individual’s best interests. Placing trust entirely in automated advice can be a poor approach to early investment.
Neglect for Personal Circumstances
Relating to the point about misplaced trust is the fact that it is easy for new investors operating online to embrace recommended strategies that do not match their personal circumstances. For instance, a new investor might be nudged toward assets they cannot afford with a small initial investment. Even more troubling, a newcomer might get started with a particular app or platform that is better suited to day trading than long-term investment. It is all too easy for first-time investors to get swept up in convenience, recommendations, and the desire to get started, only to realize that they’ve neglected their own circumstances and interests.
These are all real potential problems. They should not, however, dissuade Indian consumers from trying their hands at online trading. With a little bit of strategic thinking, common pitfalls like the ones listed above can be avoided, and online trading can become an invaluable part of a personal finance strategy.
Here are a few things Indian traders can do to avoid problematic issues and maximize the benefits of online trading:
Seek Education
One effective way to maximize the benefits of online trading is to self-educate before investing. Apps and online platforms make the practice of trading simple, but that process should still exist on top of a foundation of knowledge. Taking the time to research strategies and devise a personal approach is essential. From there, it is wise to read up on reliable stock predictions like some of those we’ve featured for commonly traded companies like Google and Robinhood – as well as to learn to understand the factors that can influence a given stock’s movement.
Find the Right App
It is broadly true that mobile investing apps have made markets more accessible. It is also true, however, that to avoid the common pitfalls of internet-based investment, you still need to take the time to find the right platform for you. The best app for online trading will have helpful features and favorable conditions, including access to a variety of markets, commission-free trading, investment calculator tools, and more. These apps will not automate your investing process or tell you explicitly what to do, but they will help to simplify your process as you develop your own strategies and preferences.
Diversify Holdings
One of the most commonly recommended financial and investment strategies out there is to diversify holdings. By diversifying assets when you make trades, you can make it more likely that your portfolio as a whole will perform well. A given event or a crash in a particular sector may harm one of your assets, but it won’t necessarily bring them all down. This is important to keep in mind when trying to maximize the benefits of online trading as well. As mentioned, it is vital to find an app or platform that gives you access to a range of markets and assets. This can keep you from getting too heavily invested in a single company, industry, or even type of stock.
Set Personal Goals
Lastly, it is important to set clear personal goals. With a firm idea of how much you want to profit from your trades or what you hope to gain from them, you can avoid poor strategic decisions. Online trading has countless benefits, but it has also made those poor strategic decisions easier to make for investors without clear ideas in mind. With a reckless approach, you can commit to a new stock, sell a reliable one too early, and so on at the touch of a screen. If you’ve outlined your goals and strategies, however, you will be more likely to employ patience and reason.
Follow these tips, and you should be able to join the growing legions of Indian investors who are planning for their financial futures through online trading tools. Best of luck, and please visit us again for content concerning business, finances, and more.
