Stock market is not risky at all

Maximum investors prefer to keep their savings in the hank rather than investing in stock market. The only reason is risk”. Few days back I was having a conversation with one of my friends and he mentioned, “Keeping money in bank account at least assures that it won't lose value while in stock market there is no such assurance.” Bank offers a steady return on investment; on the contrary, return from stocks is uncertain. Well, if I mention keeping money in a bank account is riskier? I am sure many of you will be surprised with this statement. Now let me tell you about a silent killer named “inflation”.
Fixed deposit in banks will surely offer 7%-8% annual interest but do you ever consider this in conjunction with inflation? In simple language, inflation is the increase in price you pay for goods. Today if your monthly grocery bill stands at 5,000 then certainly over the next one year it will increase. You can also refer it to a decline in the purchasing power of your money. Like if I kg mustard oil costs Rs 100 today then after one year you can't purchase the same quantity at Rs 100. So, today's 100 rupees worth the same after one year. As per Government average inflation rate in India is hovering around 70 last few years. I think in reality if we consider our day to day expenses then inflation will be around 10%. It means today 100 is required to cover up all your monthly then after one year the same will take 110.Calculate last year's monthly expenses and compare the same e as of now. Most of you will get the figure of around 100 can be even more).
So, 100 rupees investment in bank fixed deposit turns at around 107-108 after one year but for it costs 110 rupees to cover-up the same day to day expenses. Isn't the bank's fixed deposit yielding negative return? The situation will worsen if you consider tax. Interest income on bank's fixed deposit is fully taxable. Depending upon your taxable income, the tax rate varies. For the person in highest tax bracket, it is as high as 30.9%! Even if you are in the lowest tax bracket, then you need to shell out around 10% tax on the interest income from bank's fixed deposit. If you combine tax with inflation, then bank's fixed deposit will offer a negative return. 10 lakhs investment in bank's fixed deposit will become 7.48 lakhs only (after 1 year) considering 8.5% interest, 9% inflation and 30.9% tax (highest bracket). For individuals in the lowest tax bracket, it offers a marginal negative return. The irony is interest on the fixed deposit is indirectly related to inflation. Thus in conjunction with tax and inflation, fixed deposit can't offer a positive return. Still, you want to say that the fixed deposit is one of the safest investment bet? The saddest part is that more than household savings are in the form of fixed deposit. You may state that investing in the fixed deposit is for diversification. well many tax-efficient debt investment options are there Which offers steady and “guaranteed return” and also serve the purpose of diversification. The problem is many of us are not aware at all.
“Investing your surplus in bank's fixed deposit is risky”
The one and only risk
Investing in stocks is similar to that of driving a car. From the beginning, nobody is an expert in driving. You need to learn driving. If you skip the learning portion and take steering on the very first day, what will be the consequences? Accident is almost certain. You can escape from the accident but in that case you are just lucky. Similarly, without any knowledge you are bound to lose money in stock market. You can earn on few occasions, but that's just because of your luck. To earn consistently, you must have in-depth knowledge. To avoid any accident, an experienced driver also needs to drive carefully. Similarly, experienced investors should also remain cautious about his investment decisions to avoid loss. Chances of accident can be minimized if you follow certain driving rules, similarly by following certain disciplines you can easily minimize the chances of losing money in stock market. Driving doesn't require any formal educational degree. It is not like that only mechanical engineers, or those who have in-depth knowledge of motor mechanics can only learn driving. Irrespective of the degree, anyone can learn driving Similarly, an MBA in finance or similar degree can'ten success in equity investing. Rather, I think without an MRI one can become a better investor. Irrespective of education background and specialization, anyone can learn the tactics of successful investing. It's simple but not easy. “Simple” in the sense that it doesn't require high intellectual. “Not easy because it requires years of practice, discipline, dedication and willingness to learn.
Avoiding equity investment means you are most likely unable to beat inflation. Banks and post office deposit offer negative or flat return (inflation adjusted). Very few investment options (like Real estate and equities) can offer above inflation return. Over the last many decades, across the world, among all asset classes, equities have outperformed all others over the long run. So, isn't “zero exposure” in equities a sheer negligence? Are you not taking a big risk by avoiding equity investment?
“Avoiding investment in equities is risky; very risky".