Of young market drivers

According to the survey, “young generation is very analytical, quick and responsive to the every changing market scenario.”
Of young market drivers
Representational Pic

One of the amazing facts about the financial system is that young ones are fast joining the multi-billion stock market of India. These young investors try to make maximum use of electronic gadgets, superior technology, rising internet speed and access to analyst information to take a dip in the stock markets to multiply their investment quickly. And online trading of stocks, which is growing by 160% year-on-year basis, has become a passion among young investors.

An ASSOCHAM survey reveals a 'steep rise of over 76% of online trading among the young investors in the last couple of years. According to the survey, "young generation is very analytical, quick and responsive to the every changing market scenario."

However, in the emerging market scenario, the knowledge about the market is important.  Let me link some key driving lessons here to investment matters.

While driving a car we know we have to respect traffic regulating signals and never drive through a crossing when the signal of your driving lane is blocked by red signal. Then the most important skills in driving is judging speed – applying appropriate pressure on accelerator matching appropriate conditions.  

So respecting traffic lights and balancing speed according to the given conditions are primary needs to develop and chisel your driving skills. Pertinently, you actually develop driving skill over time as you build experience driving in different conditions.

Now let me drive these driving lessons into the investment arena. While driving in the equity market, respecting regulatory signals and judging speed appropriately in this crowded market place is inevitable. Otherwise a small error here can result in huge financial loss.

Usually these young investors are raw in nature as most of them lack thorough knowledge about the market. They trigger their investment sentiment while listening to 'money-making' stories and turn deaf ear to stories of failure in the stock market. This way they are unable to maintain appropriate pressure on the accelerator or in other words misjudge their speed while navigating in the market. Ultimately they succumb to the risks and lose their hard earned money.

With the advent of technology and growing online networking of workplaces, homes, bed rooms, etc. more and more people are entering into the market arena. The market experts point out the young people for actually turning the market into a crowded place. Signals to help the investors to navigate safely at the cross roads in the market are meaningless to these young investors as they enter into this crowded place at a high speed making risky investment in stocks to earn quick bucks. Most of the time, they ignore the red light and expose themselves to high chances of getting hit.

Ours is a place where a long list of these kinds of investors exists, who ignored risks associated with the equity market and even lost their capital. These raw investors diverted their basic business funds into the equity market and even raised bank loans only to suffer losses. They basically ignored regulatory signals and drove through the crowded market at a high speed.  Otherwise, to mitigate the risk of being hit or hurt, the investors should have driven through the crowded market without breaking signals and also maintaining appropriate the speed.

Lastly, for everyone – young or elder ones – the basic thing while entering into the market is to understand that investing in equity market is all about balancing risk and reward. Risk bearing capacity differs from investor to investor. But there are a few rules like the ones mentioned above that generally apply to investors irrespective of their risk bearing capacity.

(The views are of the author & not the institution he works for.)
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