Yourmentor

[Equity Series]

Session 3: 5 Reasons Why Retail Participation Has Been Low in India


We are glad to have you with us for our 3rd Session on Equity – and that is 5 Reasons why retail participation is low in India.

Alright so let’s get started

Despite equity being a popular asset class across the globe, the participation of retail investors has been rather low in India although the country has the highest savings rate in Asia and in the world.

Well, among the several reasons, here are


5 Reasons Why Retail Participation Has Been Low in India


Reason #1: Lack of Awareness


Why Invest in Equity?
  • Investing in equity is perceived to be gambling due to the volatile nature of the equity market.

  • Retail investors are not aware that over the long term equity as an asset class can beat the inflation.

  • Very little has been done to educate and promote an equity culture.



Reason #2: Lack of Knowledge

Why Invest in Equity?
  • Where, when, how much and how to invest in equity is not known to many Lack of understanding of market dynamics and investment approach cause retail investors to make bad decisions while investing in equities. Some retail investors base their investment decisions merely on tips and news flows and do not back those decisions with sound fundamental analysis; which is a wrong approach.

  • Financial education is not imparted at an early stage. It is only now that a few schools have started educating children about money.

  • Those who have some idea, their knowledge of equity investing is quite fragmented.


Reason #3: Low risk appetite

Why Invest in Equity?

  • Traditionally Indian investors have always been risk averse i.e. they fear losing money and therefore prefer investing in instruments such as fixed deposits, gold, etc.

  • After having burnt their fingers in stocks in the past. Many retail investors have avoided equity as an asset class in their portfolio.



Reason #4: Reluctance to take professional help

Why Invest in Equity?
  • Retail investors rely on tips from friends and family. They go by the ‘khabar’ in the market and quite often end up losing money.

  • Retail investors aren’t comfortable paying professional fees for advice.



Reason #5: Stock market scams have debased equity investing

Why Invest in Equity?

  • A myriad of stock market scams in India have affected the trust of retail investors.

  • Many investors still seem to be dissatisfied with the regulator in terms of investor protection, which ideally results in low confidence while investing in equities.




So to end our today’s learning exercise we now invite you to test your learning by taking up this simple quiz

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