Recent data released by National Stock Exchange (NSE) has revealed that retail participation (Individual Investors like you and me) in the stock market in the non-derivative segment has been on the rise over the last five years and has reached a high figure of 45% in FY21 as compared to 33% during FY16. 

And the same retail participation in the derivative segment (Index Future) of the stock market has risen from 32% in FY16 to 39% in FY21

If we see the stock ownership of non-promoter shares during the last three years, we find that the retail investors’ ownership is almost flat at around 18%

So, although retail participation in the stock market is on the rise, their ownership of the stocks is almost flat at around 18% over the last three years. It indicates that retail investors (like you and me) are more towards the trading side of the market rather than buying the stocks for a longer duration as part of strategic investments in the equity.

A very minuscule percentage of traders make money in the stock market based on their understanding of the technical analysis, momentum, and insight about the market trends, etc. Successful traders play smartly by limiting their losses with strict stop loss but gain heavily during major market trends. On the other hand, most of the other traders try to speculate and gamble in the market and lose their hard-earned money. I have not seen many people making money while trading in the stock markets during my three and a half decades-old association with it. 

Conclusion

  • Equity has been the best performing asset among all other asset classes over the longer duration. BSE Sensex started with 100 points at the time of its inception in 1979 has risen to 50000 points in 2021, thus giving 15.95% CAGR over the last 42 years.
  • It’s almost impossible to time the market; what matters is time spent in the market. The longer we stay invested, the better is the compounding. They say, 90% of the gains in the market have come in 10% of the time. Warren Buffett’s 96% of the wealth ($81.5 billion out of $84.5 billion) came after his 65th birthday. ​This guy has been investing Consistently for two-Quarters of a Century (By Morgan Housel in his book The Psychology of Money)
  • Invest in good quality stocks, if you understand how to do it, otherwise invest through mutual funds as part of a systematic investment plan. 
  • Avoid trading in the stock market, either through derivatives (F&O) or intraday. More often than not, we will lose our hard-earned money
  • Follow KISS (Keep it simple and straight), there are better chances to earn inflation-beating real returns in high single-digit
  • Last but not the least, consult a financial planner if we find it difficult to understand the nuances of investments

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