Investors can benefit whether stock market crashes or surges
In April 2020, Joy returned home from Abu Dhabi after losing his job due to the global spread of the COVID-19 pandemic. He had only Rs 10 lakh left from his years of hard work in the Gulf.
With no prior knowledge of investment options beyond traditional bank fixed deposits (FDs), Joy sought alternatives as interest rates continued to decline. During his search, he came across 'Investment Lessons' on Mathrubhumi Online. One particular article that explained why people lose money in stocks caught his attention. Despite knowing the risks, he decided to experiment with stock investments.
Though he was a complete novice in the stock market, Joy followed the article’s guidance blindly. His next step was to activate the stock investment account he had previously opened. He then invested in four stocks mentioned in the article.
What Happened Next?
Two later, Joy sent an email detailing his investment journey. There was no hint of regret over losing his job; instead, his message was filled with excitement. His Rs 6.08 lakh investment had grown to Rs 12 lakh, and he had also received around Rs 13,000 in dividends.
In just two year, Joy had earned more than Rs 6 lakh -- a remarkable return of over 40%. Had he left his money in a bank deposit, he would have earned only about 6% interest, amounting to Rs. 75,000 over the same period.
Joy's email included a key question: Should he withdraw his entire investment now that he had made significant profits? Or should he wait longer to maximize gains?
He had taken a bold risk, investing over Rs. 6 lakh in stocks at a time when many were hesitant. During the uncertain COVID period, stock prices had plummeted, and there was no certainty about when they would recover. However, Joy’s investment decision paid off handsomely.
Gaining from Uncertainty
Joy unknowingly capitalized on a great opportunity -- investing during a time of uncertainty. His story highlights a crucial lesson: it is possible to profit in both rising and falling markets.
Since Joy had already earned a 40% return and needed funds in the near future, he was advised to withdraw his initial investment immediately. The remaining profits could be withdrawn gradually. Now that he understood the market’s potential, he could reinvest small amounts once he had a steady income again.
A Success Story Built on Smart Decisions
Several factors contributed to Joy’s successful investment experience:
- Choosing fundamentally strong stocks: Investing in well-established companies helped mitigate risks.
- Investing at a low price: He bought stocks when they were undervalued, ensuring higher potential returns.
- Exercising patience: He stayed invested for a long time instead of making impulsive decisions.
During this period, the Sensex crossed 85,000 points. While there were occasional fluctuations, no significant corrections were evident at first. However, months later, the major indices fell by about 12%, and mid-cap and small-cap indices declined by 20%.
Learning from Joy’s Experience
Despite these market fluctuations, Joy remained confident. He understood that downturns were temporary and saw them as opportunities to buy more stocks at lower prices. Additionally, he kept Rs 2.75 lakh in his bank account as a safety net.
Since Joy invested with full awareness of the risks, he was prepared to wait even if another market downturn occurred. His confidence stemmed from his belief that he had chosen the right stocks.
Currently, many investors fear losses in the stock market. India now has over 18 crore demat accounts, with more than 10 crore accounts opened after the COVID-19 pandemic. Many people entered the market hoping for quick profits but ended up incurring losses during the recent downturn.
The Key to Long-Term Wealth Creation
The stock market requires patience and knowledge. Those who take the time to study the market, identify strong stocks, and invest strategically can create long-term wealth. Instead of chasing quick profits, investors should:
- Define their financial goals.
- Select mutual funds that align with those goals.
- Invest systematically through SIPs (Systematic Investment Plans).
For a compelling example of long-term stock investment, consider Infosys. In 1990, an investor could have bought the company for Rs. 2 crore. Today, Infosys is valued at Rs 7.3 lakh crore. This demonstrates how strategic, long-term investing in strong companies can yield extraordinary returns.
The current market correction should not be feared; instead, it presents a golden opportunity for investors. By making informed decisions, selecting high-quality stocks, and maintaining a long-term perspective, investors can build wealth despite market fluctuations.
Joy’s journey is a testament to the power of investing wisely, even in uncertain times. Let his experience inspire you to approach the stock market with confidence and a well-thought-out strategy.