The number of demat accounts has increased significantly and crossed the ten crore mark in October 2022. There is a rise in retail investors’ participation in the stock market. Most of those fixed deposit (FD) and gold lovers have taken the stock investing route and employ funds in stock investments also to gain inflation-adjusted returns.
It is noteworthy that retail investors now account for 52% of daily trading transactions in the stock market. On the other hand, Domestic Institutional Investors (DIIs) account for 29%, and Foreign Institutional Investors (FIIs) account for 19%. It is clear that the retail followers in Indian markets are spreading their wings.
Factors Ushering Retail Participation in Stock Markets
Convenient Way to Make Online Investments
Technological advancements have brought stock exchanges online. Now the stock trading is entirely a digital process that has eliminated the entry barriers for retail traders. Individuals can open the best demat account along with a trading account with reputed discount brokers for cost savings and invest online in numerous financial assets conveniently, like equities, mutual funds, bonds, exchange-traded funds (ETFs), government securities, etc.
The keys to directing traditional investors towards stock markets include improved financial awareness and an increased flow of information about financial markets. The spread of market information has made it easier for individuals to take advantage of online courses and informational tweets/articles as guidance.
There is no lock-in period for stock market investments. Whenever an investor wants to liquidate their demat investments, they can sell them online at the relevant stock exchange using a trading account. Stock markets help individuals to meet their long-term or short-term financial goals. They can choose to employ their funds in short or long time frames.
What Investors Consider to Make Stock Investing Better
- Saving on Investing Costs
Most investors prefer reputable discount brokers to take advantage of cost-efficiency in the investing process. Discount brokerage firms can offer free Demat account opening facilities, zero annual maintenance costs (AMCs), low brokerage trading accounts, low margin trade financing interest rates, and many other benefits to their clients.
- Understanding Risk Management
Risk management is inevitable in the stock market. Individuals understand it and strategize their investments in the following manner:
- Research-based Decisions: The most important aspect of investing in the stock market is the selection of return-worthy securities. It requires decent efforts toward fundamental and technical aspects concerning stocks.
- Diversification: They prefer to have a broadly diversified portfolio across various financial assets to minimise the risk involved.
- Buy-and-hold Strategy: One of the strategies to invest in the stock market is long-term investing which spreads the risk over the investment period. Also, it is helpful to have returned with the compounding effect.
- Investing in business one understands well: Individuals prefer to invest in businesses they understand – the economic impacts companies in various sectors.
- Following a Disciplined Investment Approach
Stock markets fluctuate daily. Discipline is a crucial factor that successful investors consider in the stock market. Both short-term traders and long-term investors need to be disciplined by sticking to the financial plans and set of rules, irrespective of the circumstances. For example, a long-term investor should be focused on long-term returns instead of short-term market fluctuations. If an investor observes that one of the stocks in the portfolio is not performing well, they can exit from it.
- Avoiding Emotional Clouds
Investors cannot make investments just because they like the company or its product. They cannot exit from investment due to fear or stay invested due to greed. Individuals understand that they need to stay focused on their goals, time horizon and risk tolerance and be informed not influenced by the news or rumours. A financial plan can help them to achieve the goal of emotionless investing.
Thus, stock market activities in the online trading system are more secure, transparent, and fast. Individual investors are increasing their presence in the stock market and making research-based prudent decisions to make stock investing profitable.