Most people today prefer to take up a job with a private firm rather than a Public Sector Undertaking (PSU) for one simple reason that they are offered a better pay-package. But, not many of these people have a good understanding as to how to manage their savings and assets. This is the reason why we see so many asset and fund management firms flourishing (well, not exactly flourishing after the recession hit but in business nevertheless). A US-based study conducted recently showed that 3 out of every 4 individuals investing in equities enjoy a higher rate of return than what mutual funds (those offered by asset management firms and banks) would have paid them had they invested there. Further, the study showed that 22 out of every 25 mutual funds outperform the markets taken on a quarterly basis. Why then are most people still ignorant about investing in equities?
Most people who are apprehensive about investing in equities are the ones that associate it with gambling or have no knowledge about it all. Some have the misconception that in order for you to make money in the market someone else has to lose money. This is not the case. Investing in equities is not something that you do blindly though. When you buy stake in a company you are making an investment in the company and will be rewarded based on its performance in its respective sector. When you buy equity shares of a company, you are actually buying a part of the company.
The other thing that confuses people is the fluctuating prices that they see on news channels. They see them varying constantly and decide to buy shares of a company that has its price quoted on an increasing slope. You must remember that there is no pattern as such for the fluctuation of the prices. The price that is quoted is nothing but the last price at which shares of that company exchanged hands. Since a host of people trade throughout trading hours on each market day, we witness a fluctuation in prices.
Bearing all this in mind, investing in equities can turn out to be highly profitable if decisions are taken judiciously and not merely on instinct.