Some Ugly truth about the stock market.

The stock market looks at a golden spot to make money. There are  popular stories of many investors in India and abroad, who have made good money by investing in the stock market. However, there are some bitter truths related to the stock market, on which market analysts and investors refrain from discussing.

In this post I am going to discuss with you about the ugly truth associated with the stock market.

1.Even the blue chip stocks can’t give guaranteed return.

Even 'bluest of blue chips' can 'perform less' and 'not' gives a return for a sustained long term period of time. There is risk involved in any stock you invest in, no matter how safe it can be. There are many reasons which can affect the company's share price. For example, domestic and global, company fundamentals, interest rates, social and political reasons, and other reasons too. If someone is promising to give you return with guarantees then either he is not experienced or he is lying to you. In the stock market, you can reduce your risk of taking an informed decision.

2. 99% People lose money in stock market.

This is one of the worst truths about the stock market, not everyone earns money in the stock market, 99% of people lose their money. Not because the market doesn’t give equal opportunity to everyone, because of people do not want to work hard to earn profits.

Generally people adopt two paths to invest in the market, first, they will investigate about the company by themselves and wisely make investment decisions. Second, they invest on the sayings of their friends and relatives, most people choose second path.

3. Can we pay 1000 for one Liter water.

Sound Foolish, but this is the simple scenario of the stock market.

Most people are ready to pay a higher price to buy a hot stock, and when the heat of that stock is gone, people have lost their money. There are many such companies which are trading at high valuation, but the price of their shares is not increasing at a decent pace. Buying a stock at high premiums is a ugly truth about the stock market.

You will be ready to pay 1000 rupees for 1 liter of water only when you do not know its true value. It is exactly the same with the stock market investors, the stock market investors also buy stocks without any full study, so they pay higher prices.

4.Company corporate manipulate their earnings.

It seems bad to say, but yes, corporate companies manipulate their earnings, it is also an ugly truth associated with the stock market. Everyone wants to invest in a fast growing company. And what could be a better sign of fast growing company compared to the company's consistent earnings?

However, when the company starts expecting extraordinary performance from the quarter after the market quarter, then it puts too much pressure on corporate leaders to meet those expectations. And when they fail to do so, they are afraid that their share price may fall sometimes they manipulate their results.

There are many examples that are found guilty of tampering in financial statements. The best example (you already know) is -Satyam computers.

Conclusion - Top expansion analysts who estimate economic expansion or slowdown - will be 'unsuccessful' to predict the similar situation of 2008 (where the market falls more than 60%).

Advisers provide financial advice based on available information and their experience. If you expect them to predict the future - you are wrong and if they predict the future, then they are. When you are entering the stock market, be prepared to see many unexpected things. Nobody knows in the future.