Session 1- Basic Finance- Investing, Investment Strategies, Financial Terms & Much More…

Our first session was designed to introduce and explore the important aspects of investing. The approach that we intended to include theoretical knowledge and practical insights would be encouraged through active participation and sharing their respective experiences. We started from the most basic question: why to invest? – the critical question, which, if answered correctly, is essentially able to understand the importance of investing in today’s financial world. We explained how investing was not accumulation for money, but you were sure of where you were placing the money so that in the near future you would be financially secure. Saving was used as an example to show the difference between it and investment.

Using real-life examples, we demonstrated how consistent and dedicated investing could dramatically change the direction an individual’s finances take. Having established our ‘why,’ we moved on to where we would invest. There is a vast land for investments and even the most experienced investors find it pretty intimidating, especially for first-timers. So we categorized investment assets- stocks, real estate and gold- according to their respective levels of risk and reward, so one investment class fits better the risk profile and financial objectives of a given investor at a given time.

We discussed how stocks are equities that represent ownership in a company, from which investors can profit in the appreciation of capital and even receive dividends. Conversely, Real estate as an asset is tangible and can generate, in the long term, appreciation and rental income, while also requiring significant capital and bearing risks of market volatility and maintenance. Gold was described as a traditional safe-haven asset, whereby it is used as a hedge against inflation and financial uncertainty. We illustrated, using practical examples, how an investor who chose to invest in technology stocks like Apple or Microsoft ten years ago would see his money multiplied many times over whereas an investor who opted for bonds would see growth over a period of time, though not as high as that from the former. These examples made the different asset classes less mysterious and allowed participants to picture where their money could work for them.

We then introduced alternative investment strategies, where once again, the specific approach depends on goals, risk tolerance, and market view. We covered active investing – or actively buying and selling securities with a focus on beating market averages – and passive investing, which generally focuses on buying and holding securities over time in an attempt to mirror market performance. Indexing strategy means funds that are designed to track the performance of a particular index like the Nifty or Sensex. This strategy reduces the need for incessant management and often results in investments that are cheaper for the investor.
This encouraged members of the society to share their views and also ask questions. The discussion really deepened understanding of the strategies involved, besides allowing participants to learn from each other’s experiences.

We held an active interaction about investor behaviour-the particulars of sunk cost fallacies, mental heuristics and common tendencies for retail investors. We elaborated on the more complicated issues regarding derivatives, market manipulation, and so on. We clarified what derivatives are: financial contracts whose value depends on the performance of an underlying asset.

A few students told their own experiences in trading and investing, therefore complementing the whole conversation with quite unique examples. Some shared their experience of successful results from trading and strategy designed during such trading and how other students had encountered problems that were actually related to an unstable market. These personal experiences taught great lessons and reminded people of the requirement of information and adequate preparation before making their investment decisions.

One part we found very interesting and engaging was when we calculated how much an investment put into the Sensex at ₹100 in 1979 would have appreciated over the years. In this exercise, participants could really understand the possibility of long-term investments and enhancement of their wealth based on market growth. In our graph, we explained how an investment in the stock market grows exponentially with time. Consequently, in that respect, we indicated the necessity of investing early enough and being constant with time.

In conclusion, we summed up that understanding financial terms is important, the various factors that affect the stock market, and the necessity of continuous studying in the world of finance. It was a great introduction to everything to do with investing- a mix of theoretical knowledge and personal experience laced with practical wisdom. We look forward to the future sessions and will build on this foundation by delving into specific topics and equipping the members to navigate confidently in the financial world.