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The rapid rise in growth of mutual funds and exchange traded instruments has created a perception that investing in the stock market is an unnecessary risk. Well, many individuals work on the presumption that the primary function of the stock market is to facilitate speculative transactions. Certainly not.
Speculative transactions merely happen to be a byproduct of the manner in which the stock exchange works. If you take a look at real investors in stock market, you will find that they are there to buy stake in companies that they think will provide generous returns on their investment. The most prolific investor who comes to mind is Warren Buffet.
He focuses on businesses that he understands and behaves as if he is going to become the owner of the company that he invests in. This is one approach that very few people dare to take. To behave as a full time investor and to buy stake in companies with a view of sticking with them for the next 20 to 30 years requires a lot of courage.
It will be a profitable transaction because average return of stock market spread over a decade is higher than best financial instruments in the market. You can invest in bonds, mutual funds or even go in for dead swaps. It is only when you invest in the stock market will you generate maximum returns on your investment.
Hence, before you conclude that investing in stock market is a waste of time, always remember that the speculative investor is just our byproduct and the long term investor is the ideal that you should base your analysis on.