It is said that in India, the middle class is the real class of people. Others are mere boundaries. The ‘Aam Admi’, as middle class in India came to be known, had its fair share of limelight during the Anti-Corruption Era. It is this middle class for whom the Finance Minister fights for, politicians beg for, and taxes are collected from. To discuss who belongs to the middle class is too much to ask for. So the next best thing to discuss is their investments. It is a well known fact that the middle class in India are financially sound, but just only. It is a never ending race against old age to earn a little more, save a little more, invest a little more, and thus live a little more happily. In such a scenario, stocks are the middle class’ boon.
Here are six reasons why the middle class can and must invest in stocks.
Before that, what are stocks anyway? A stock refers to a proportional share of value of a particular business which is division or piece of the ownership of the business. That is about all you need to know, as far as stocks are concerned. Now for the reasons to invest in them.
1. Stocks are Safe: the middle class investor has loads of demands, and rightly so because the funds invested into the stocks could have been clipped from their children’s education fund, from their plans of building a home or some special fund created for a contingency. The bureaucracy in India, by the name of the Government has solved this problem. Dmat Accounts, the NSE, SEBI, are all working constantly to protect the interests of genuine investors, so one can be rest assured that their stocks are in save hands.
2. Stocks are rewarding: there is no better equation to define the stock market like RISK= REWARD. It is visible that not only the profits but cash dividends as well are showing constant upward movement on quality stocks. And for a middle class family nothing can sound sweeter than the sound of a larger check in the mailbox. Company’s earnings are on the go, rising surely and steadily, year after year. This can be summed up as a highly rewarding investment, custom made for the middle class.
3. Stocks are liquid: Stocks are probably the most liquid near money assets that one can find. In comparison to real estate investments, bonds or government securities such as treasury bills, stocks fair better liquidity and movement. You can expect to make a few 1000 sales of your stock position or a few 1000 buy of another with a matter of few market hours. The reason being, stocks have the silver lining feature of being traded in. This will attract the eye of the Indian middle class, because this ensures that every situation can be a win/win situation, to buy good stocks and sell bad ones. And what a service to give to the middle class, to bail out on stocks when they are bearish and buy them when they are bullish.
4. Stocks are growing: In stormy times like these, to make a bold statement that stocks will outlast any other form of investment and is the best investment for a middle class investor is impossible to prove. However, one thing is certain; with the safety, liquidity and ease of division Stocks can ensure any investor of an excellent investment, no matter what the market condition. Stocks are more than just money’s worth of a sheet of paper or a certificate on your screen. It is the testament that the one is possession of it is an owner of a company and that grants it ownership utility of the highest form. As long as the company lives, the stock will earn money and keep the investor happy. And as of now, Indian companies are flourishing. Yes, the returns will vary and the profits will slump on the bad days but the reversal back to large profits and regular returns is as fast, if not faster. All in all, stocks will fare better than most investments as it has in the past and present, and boldly in the near future.
5. Stocks are saviours: in times of need, stocks are life savers, and not just metaphorically. Borrowing is as easy as it gets when it is against your stock value. Again, this will benefit the middle class greatly, when they have an approved marginal borrowing that their broker has agreed upon. And as of now, writing a check against your account is as easy as writing a diary. The silver lining here is that a debt is also created in case your balance is nil and interest rates are very affordable.
6. Stocks are Middle Class-ish: it is a proven fact that stocks are one of the best wealth creators of the 20th and 21st century. And more importantly it’s not just meant for the super rich. The regular, cautious and passive investor plays as much a role in shaping the stock market as Vijay Mallya does. Buying stocks, holding them for long periods, participating in the stock market and reinvesting in dividends reinforce the Middle Class mentality. Earn more, save more, invest more and get more happiness. Stocks are safe enough for the middle class to buy, liquid enough for them to sell, rewards them sufficiently and will continue to reward them in the future, and all these qualities make up a dream investment for the middle class.
To conclude, the Middle Class of India is left to decide whether or not stocks are there future, but these points should reinforce the fact that they shouldn’t be taken lightly. After all Warren Buffet and Rakesh Jhunjhunwala were from a middle class background and now even their great grandsons won’t have to worry about not having money. Everyone can’t be born rich, but they can become rich.
This post was written by Sampath who holds great knowledge about stocks and investment. Apart from consulting people to better manage their funds; Sampath has varied interests on subjects like fitness, yoga and cooking. He uses online services of websites like Flipkart to buy books as they can be bought at a much better price with use of coupons and offers.