What are the risks involved in stock investing? Do the pros outweigh the cons? 

Answer: The risk of investing in the stock market is the possibility of the share price decreasing from the levels you invested. It can happen for multiple reasons. For example, the company’s earnings or growth have stalled, leading to its underperformance, or you may have invested in the shares at their peak valuations, or the markets are not doing well due to domestic or global economic slowdown. The third aspect can still be acceptable if it’s global and not India-specific. Stock Markets recover with earnings growth and when the company’s fundamentals are strong. However, the first factor is tricky, and one should avoid companies that don’t deliver growth to shareholders.

Stock investing offers many opportunities for wealth creation to investors. For instance, Nifty has increased nearly eight times over the past two decades. Long-term investing in quality stocks has always paid returns to shareholders. Systematic Investment Plans (SIP) in shares, including index and large-cap stocks, have always been a long-term investing recipe for simple retail investors who don’t have time to look at the computer screen for daily share price movements. However, everybody should do a “Pros And Cons Of Stock Investing’ Analysis basis on their needs, wants, and existing investments if any to get perfect clarity.

Should I buy stocks through a stockbroker or approach a financial advisor for guidance?

Answer: Both these approaches serve different purposes for investors. However, many stockbrokers now offer execution and research support to investors. In terms of advantages, a dedicated financial advisor brings more personalization to your investment portfolio. On the other hand, a brokerage firm brings institutional expertise to stock investing. So, both approaches are helpful. To buy stocks, you have to go through the stockbroker. For advice, you can choose a financial advisor or stockbroker who offers research support.

The author is a vice president of Equity Solutions Group at ICICI Securities.

Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organization directly or indirectly.

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