As a layman, can I manage to make money in the uncertain (risky) Stock market ?

As a layman, can I manage to make money in the uncertain (risky) Stock market ?

It is a common the observation that whenever you start investing, the market starts to fall and the moment you take your money out, it starts to go back up again. Like it happened with me in 2008 (read my previous blog - How I wasted my father's hard earned money), the market started to go down in the very month that I started putting my money in it and I  incurred heavy losses. So the question arises – can I survive the storm of stock market.

Well this is the question that almost all of us ask at some point of time. The answer is not very straight forward. But yes I can definitely say that you can understand the market if you pay due diligence and then you can yourself decide whether it is good for you.

should I fear stock market ?

Understanding the difference between gambling and investing

Most people’s source of knowledge about the market and the way it works is through uncles, aunts, friends and aqaintances who supposedly have a better knowledge of money matters. Besides that, the best we get is through TV channels chattering all day about which sector is attractive and which stock is going to go through the roof. Well all of that is what makes it a gamble. You assume that a stock is going to go up (your assumption, not backed by logic) and you start dreaming of becoming rich overnight. If you put in your money with this thought process in mind, you are sure to lose all of what you put in. 
In order to have a sound investment, you have to understand that stock market is not same as gambling, although there is a lot of uncertainty associated with stock market also. In gambling, you are totally left to chance after you put your money in the game. And in most cases you lose !
That is not the case with stock market. Why most people lose money in stock market is because everyone treats it like a gamble. With no knowledge or expertise, if we try to bet on a stock on the advice of a novice, we are sure to lose money.
To understand better, just have look at the nifty chart for past 10 years and look at the return it has given over these years. You will realise that in past 10 years, despite slowdown and crashes, Nifty has gone up by about 5 times. That is to say, if you invested Rs 100 in few of the stocks comprising nifty, your corpus would have likely grown to Rs 500 today. However if you invested in 2008 during the peak, like I did, and were frightened with the free fall of the market and had taken your money out, then you ended up with loss !.

Between 2009 and 2019, the nifty has gone up by about 5 times and most of the good stocks have done better than that !

What are you doing out there ?
It also depends on what you are upto when you are venturing into the market. Some people get carried away by the upside that the market can give within short periods of time. They want to make quick money. On top of that, they learn technical analysis and think that they can predict the market. Well they are successful in predicting it a couple of times and gain confidence, or should I say, ‘overconfidence’. Then they risk their money on one bet and lose it all, because you can be lucky a few times, but not always. That is to say, if you speculate (gamble), you lose !  
Some newbies often try to trade in options and futures which is again a very risky proposition unless you are a professional with many years of experience. I don’t advice anyone to go for options and futures trading. Here too, you might get lucky on a few occasions, but you cant really beat the market in long term and you can certainly not create wealth that way.

So what do I do ?
Investment is the answer. Get educated about the workings of the market, know about companies and how to assess them, pick up good quality stocks and hold them for long term. This is the sure-shot way to create wealth. All the millionnaires all over the world have done it the same way – investing for long term. It is very important to understand that there is no way you can get rich quick. It requires a lot of patience and diligent work in investing to create wealth over a life time.  

Can I do it ?
Yes, all of us can do it, provided we do it the right way. Invest your time in studying, understanding and getting educated about the market. You may take help from the books that I recommend for investing in stock markets (coming soon). Learn about the basics of stock market, trading and investing. Learn about fundamental analysis – the quality of companies and stocks, learn about the technical analysis- the short term price movements of stocks, invest your time in preparing yourself for it. Get a demat account, start with small investments, learn from mistakes (be careful in investing and do not invest hastily, dont be greedy) and invest gradually. It will take some time, but it surely will bear fruits. Happy investing !