When to take a step back from the stock markets
Subscribe to enjoy similar stories. As terrible as the pandemic was for the world, one positive outcome was that stock markets piqued the interest of the youth in India. As work-from-home ensued and stock markets rallied, retail investor participation in Indian equities skyrocketed.
From just 4 crore demat accounts in FY20, the number of demat accounts in FY24 had jumped 350% to a whopping 14 crore. While this rise in retail investor participation indicates a shift in stock market dynamics, it does not necessarily mean that financial literacy has improved. To elaborate, before the pandemic, it was difficult to get individuals to start investing in stock markets.
But now, the problem has reversed. Given the supernormal returns delivered by the stock markets since 2020 – 200% in about five years, it has now become a task in itself to convince investors to take a step back from stock markets, even when taking that step back is crucial. Case in point: a prospective client who had approached me recently with sky-high expectations.
To conceal his identity, let us address him as Harish Vitthal. With the resolution of sorting out his finances in the new year, he sought my advisory services. He is in a leadership position at a corporate and has a decent corpus.
He is looking to invest in the stock markets with the objective of growing his corpus sufficiently to pay for his daughter's college fees. So far, so good. But this is where it gets complicated—his daughter’s fees are due in two years.
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