As of 2021, the global market cap grew to $120.4 trillion till 2nd quarter of FY 2021. It was $30.7 trillion in 2000, which means a rise of 291.5% (or 6.4% CAGR).
The New York Stock Exchange (NYSE) is the largest stock exchange in the world, with an equity market cap of around $ 23 trillion as of December 2022. In comparison, the Indian equity market was valued at around $3.4 trillion.
While the global equity market is significantly larger, the Indian equity market has shown steady growth and is considered to be one of the fastest-growing equity markets in the world.
In March 2022, the Indian equity market broke into the ‘global top five clubs’ in terms of market cap for the first time. At that time India’s total market cap was $3.21 trillion – higher than:
1. the UK ($3.19 trillion),
2. Saudi Arabia ($3.18 trillion), and
3. Canada ($3.18 trillion).
Additionally, India has become a major destination for investors, representing about a fourth of total portfolio capital inflows to emerging market economies.
Considering the above facts, investing in stocks can be a great way to build wealth over the long term. While the stock market can be volatile, it has historically delivered strong returns for investors who have a long-term perspective.
In this blog, we’ll take a closer look at stocks and stock investing, and provide some tips for getting started in the stock market.
What are stocks?
Stocks, also known as equities, represent ownership in a publicly traded company. When you purchase a stock, you are buying a share of ownership in the company. The price of a stock can fluctuate based on a variety of factors, including the company’s financial performance, industry trends, and broader economic conditions.
Types of stocks:
There are two main types of stocks:
- Common stocks and
- Preferred stocks
1. Common stocks: represent the majority of stocks traded on the stock market and typically offer investors the potential for long-term growth through capital appreciation and dividends.
2. Preferred stocks: offer investors a fixed dividend payout but typically have less potential for capital appreciation.
Benefits of investing in stocks:
Some of the benefits of investing in stocks include:
1. Potential for long-term growth: Historically, the stock market has delivered strong returns over the long term.
2. Diversification: By investing in stocks, you can gain exposure to a diversified portfolio of companies across different industries and sectors.
3. Liquidity: Stocks are traded on public exchanges, which means that they can be bought and sold quickly and easily.
Tips for investing in stocks:
If you’re interested in investing in stocks, here are some tips to keep in mind:
- Do your homework: Before investing in a stock, research the company’s financial performance, industry trends, and competitive landscape.
- Diversification is the key: Consider investing in a mix of stocks across different industries and sectors to reduce risk.
- Take an expert’s opinion: A financial advisor can provide guidance and help you make informed investment decisions.
- Create a financial plan: It’s your choice, whether you want to trade short-term or invest for a longer term. In both cases, do consider your risk-reward ratio wisely before investing.
Conclusion
In conclusion, stock investing can be a great way to build wealth over time, but it’s important to approach stock investing with a risk-managing approach and a diversified portfolio.
Stock markets can generate larger returns than the prevailing interest rates. It can also generate better returns than various other asset classes like bonds, real estate, and cryptocurrencies.
By understanding the different types of stocks, their benefits, and some tips for investing in them, you can make informed decisions about how to invest your money. As with any investment, it’s important to do your due diligence and consult a financial expert.
With Gainn, stock investing can be even more lucrative as it offers a platform to invest in both Indian & US equities. Now Indian investors can invest in the companies of the fastest-growing economy and the world’s largest economy at once.
