A taste of the stock market

Youngsters have a fair knowledge about the share market

An anonymous quoter — possibly someone who lost a tonne while trading — once said that one of the most difficult things about the bull market is staying on it.

Double entendres and weak puns apart, he had a point. Playing with the stock market can be risky at the best of times and disastrous at the worst.

Despite this, several young professionals in the City seem to be trading the security of mutual funds and fixed deposits for a riskier game. These twenty-somethings try their hand at trading early on and for some, the profits are worth it. Metrolife speaks to a few investment consultants and young investors to find out more.

Most financial advisors believe that this interest in the stock market corresponds with access to the internet. Anjan Kumar, a financial advisor, explains, “A majority of these investors are in the software sector and are fairly net-savvy. With access to the internet, they have no problem setting up DMAT accounts and trading. Besides, several stock brokerage companies have been conducting seminars across the City, which raise awareness about the stock market.”

One such software engineer is Rajasekhar, who began to trade when he was 26 years old. “I used to work in Hyderabad, and I’d often notice my programme manager trading during office hours. When I first tried my hand at the stock market, he was the one who guided me. I began with a small amount of Rs 10,000 and then when I started making a profit, I increased that,” he explains.

One of the interesting aspects of this trend is that many of these young investors choose to understand the ropes of the market themselves, rather than take the advice of a middleman. B S Shridhar, an investment consultant, points out that this is because of the prevailing sense of distrust towards most brokerage firms. “These firms hire relationship managers at low salaries — young men and women, who have no experience, are pushed to advise investors. Their only interest is to push for more transactions, because this translates into a higher commission for them. Because of this faulty advice, investors lose money and faith in such firms — which is why they handle their finances themselves,” he explains.

Most of the young professionals who take to trading, he adds, do so on a short-term basis. “They trade on a daily or weekly basis. They buy stocks in the morning and sell them at the end of the day — they make a fair amount of profit in this manner. If the stock doesn’t go up, then they simply hold onto it and sell it after a few days,” he says.

However, Anjan Kumar says that this isn’t the smartest move for first-time investors. “Investing in the stock market without understanding its technicalities can be dangerous. If one is trading on a day-to-day basis, they have to monitor the market continuously — which most of these investors don’t do,” he says.

A better option, he explains, would be to trade on a more long-term basis. “In a six-month scenario, there’s almost always an upward trend. For example, the period between January and April this year saw a 20 per cent movement in the market. Long-term trading also removes the need to constantly monitor the market. The best option for young professionals would be to invest in a blue-chip company for a period of around six months — they can register at least an 18 per cent profit in this manner,” he says.

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