What Is Relationship Between Small Investor And Volatile Markets?

A popular saying is that three things in world are infinite- universe, human stupidity and variability in stock markets. And the last word grabs our attention as we are most familiar with it in our daily day lives. A time was their when a job was the maximum thing a common man could think off to earn money. But today in the modern word of “32 channel generation” only job is not enough to fulfill all human needs. Today investment is not a game for rich men only, common man is also strongly influenced towards the concept. This common man can either invest in property, gold or may be in stock markets. These kinds of investor are classified as small investors.

Small investors invest a very small capital in market and wait for considerable output. For small investors volatile market is very tedious to handle. Because they cant invest in this and that stock abruptly. Their capital is very small but generally it belongs to their savings so they can’t afford the risk of its sinking. They are basically the investors who whole and sole invest for long term output. The volatile nature of market repels small investors, because a sudden collapse in market as it is going on may leads to permanent or long term sinking of their money. That why a stable market considered as good market because it attracts both small and large investors. SEM’s of most of Asian countries including India are more dependent on small investors, so it’s very importanmt to retard turbulence in markets, which in turn will attract small investors to invest more.

Ongoing global crisis and small investors:
Due to ongoing global economic crisis, raised from Wall Street due to Subprime crisis in USA is largely affecting the small investors through out the world. Markets are collapsing and small investors are dragging out their money from market leaving a critical situation worldwide. Different organizations through out the world are publicizing the fact that the small investors should hold in the market and should participate in saving the collapse by investing more. But for small investors sinking of money is unbearable and volatile markets are really disturbing for their concentrations to invest.

Sensex and small investors:
As told earlier, Indian stock exchange is largely influenced by the interest of small investors in the market. In fact Indian finance ministry provides various options in BSE investment to hold small scale investments. For small investors everything like protection of investment, online trading, broker values etc are matter of concern. To fulfill needs of investors in 1990s Indian market totally changed its preface, and since from then India stock exchange is one of the fastest growing markets in the world. SEBI, and setting up of NSE along with BSE are crucial steps for Indian market development and to attract small investors in Indian market.

Suggestion for small investors:
Markets are volatile but luckily there are plenty of investment options for small investors. The studied categories where small investors can safely play a turn are given below-

While investing in stocks it must be kept in mind that the stock of interest should be well diversified between large scale, medium scale and small scale companies. Stocks can be either large cap or small cap.

Large cap stocks are the companies whose capital value is higher then $10 billion and small cap are the ones with lower then the mentioned value. It is a common observation that usually large cap stocks do well because they have multinational profits and experiences with strongest balance sheet records, but from 2007 their performance noted to be under-expectations and it could be the same for further 4 years. So small cap stocks also play considerable role in today’s investment for volatile markets.

In volatile markets investment should always be done in good quality corporates or municipal bonds called as “Munis”. They are found to be safer in volatile markets.

Frontier and emerging markets:
Market trend is never predictable, it’s always changing. An investment in overseas emerging markets can always be seen as a beneficial dealing for small investors. Markets of china and India are very popular these days as emerging markets of world.

These are some suggestions which can help small investors to play safe with the volatile markets. As markets are unpredictable a risk factor is always involved with market investments, but without risk an appreciable output ca never be asked. So small investors should invest in markets according to their studies to save more and earn more. So that one day small investors can became large investors.

Written by Lucas Beaumont

Generalist. Wikipedia contributor. Elementary school teacher from Saskatchewan, Canada.

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