Why Indians Don't Invest in Stocks?

Actual Question:

Why Indians don’t invest in stock markets - because some people have created an illusion that investing in it will either make you rich or a beggar, which is not true?

Answer

Dear Friend!

Thank you very much for broaching a very pertinent point.

Yes I agree with you.

Even though Indian economy had tripled from a US$414 billion to $1.3 trillion in a span of ten years from 2001 to 2010, and the market capitalization of the companies stocks listed on the stock exchanges has multiplied nearly eight times, the direct participation of Indians into equity markets is abysmally low at 1.4% of the population.

I also agree with you that Indians somehow have an irrational fear of the stock markets. Indians associate stock markets with gambling. Their fears are not totally unjustified though. There are many instance of lives being ruined by addiction to and reckless intraday trading/ margin trading. Of course trading in stocks, commodities and currencies not at all investing, but Indians have somehow mixed up these two. Result is how you put it, “… it will make you rich or a beggar” which is not true, though.

Even if Indians do not think that dealing with stocks is downright gambling, many believe that at least it is very risky. This too is fallacious. Warren Buffett is right when he says, “Risk comes from not knowing what you are doing”.

Further, I also believe that Indians unconsciously associate wealth and riches to sin and poverty to virtue or morality. Anyway this is my very personal opinion and I maybe totally wrong. But I think that this belief system, if it really exists at all, is changing rapidly.

Wise, intelligent, learned and long-term investments in to equities is the only and sure path for riches and wealth creation for every common citizen.

It is not true that the stock market is a dangerous place or that the rich-or-beggar fate will befall those who deal in stocks.

Thank you,

With Best Regards,

Anand

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How The Passive Incomes of The Financially Free and The Rich Compare?

The Passive Incomes of The Rich Are Many Times Their Lifestyle Costs

Based on financial means and status, people can be classified into active income dependent, those who have earned financial freedom and the rich. If we observe carefully we can discern that the passive income streams of these three categories vastly differ. This short post, a slide literally, examines how the residual incomes of the three compare and provides insights and links to profound concepts like what is passive income, what is financial freedom and how to become rich. You will find tight correlation between ideas discussed here and those found in Robert Kiyosaki’s most popular and classic work, “Rich Dad Poor Dad”.

How the Incomes Compare

How the Annual Incomes of the Three Categories of Citizens Compare
Passive Incomes	Active Income Dependent ($)	Financially Free          ($)	The Rich          ($)
Interest	100	24,000	4,000
Dividends	-	58,000	10,00,000
Royalty	-	3,500	-
Rent	6,600	-	2,00,000
Sum of streams of passive income	6,700	85,500	12,04,000
Active, Occupational Income	48,000	18,000	6,00,000
Total Income	54,700	1,03,500	18,04,000
Present Lifestyle Expenses	54,000	78,000	3,00,000
Surplus	700	25,500	15,04,000
Investment for generation of passive incomes in future	-	23,000	14,00,000
Surplus Income lying in savings account in bank yielding low interest	700	2,500	1,04,000

Following conclusions can be drawn from a study of the above table:

1. Active, Occupational Income: The active income of the  wage earners (not financially free yet) is almost the main and only source of income. For the financially free individuals the active income constitutes a small portion of the total income. The richest individuals inspite of their riches often have large active incomes; they are not lazy.
2. Passive Income: Passive Income of the regular wage earner is miniscule. The financially free enjoy significant passive income, that slightly exceeds their present lifestyle expenses. The rich have huge passive income streams that far exceed their lifestyle expenses.
3. Surplus and Investment of Surplus: Common folks have small and insignificant surpluses that can be invested. The financially free fave modest investible surplus for generation of future passive incomes. The rich have and invest significant sums every year to further augment already existing high levels of residual incomes.

How to Become Rich

Becoming rich is a process involving various steps.

It is advantageous to start early. When young and strong it is better to work hard as well as smart and earn copious sums of active income, keep lifestyle costs low, avoid splurging, save and make prudent investments. These investments generate passive incomes. Once the passive incomes exceed lifestyle costs, it means one has attained financial freedom. Financial freedom is the first and major steppingstone on the path to real wealth and riches.

Suggested Further Reading:

• Passive Incomes Empowers Pursuit of One's Dreams and Passions
• How To Generate Passive Income?
• Passive Incomes of Financially Free and Not Free Compare?
• Low Lifestyle Costs and High Passive Income Lead to Financial Freedom
• How to Attain Financial Freedom?
• How Will My Lifestyle Affect My Children?

Conclusion

There are three classes of public, namely the wage earner, the ones who have attained financial freedom and the rich showing vast differences in their passive income streams and investible surpluses. Keeping lifestyle costs low, investing to generate residual incomes leads to financial freedom and eventually to significant riches.