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RISK IS THRILLING FOR SOME INVESTORS

When investors hear the line that certain 'investments are subject to market risks', it means 'danger or loss' for most of them, but a few associate the word 'risk' with 'thrill or opportunity' as well. These are the findings of a new survey, commissioned by capital markets regulator Sebi, which also found that investors worry more about market risks like volatility and financial losses rather than operational risks such as corporate governance issues and insider trading. Risk, returns and liquidity perceptions demonstrates that while individual retail investors are surprisingly rational about certain aspects of financial decision-making, they can also be completely irrational regarding a number of other market aspects. The word 'risk' itself has different meanings for various investors. When the word 'risk' is mentioned, 'danger' is the first word that comes to the minds of 33 per cent of the investors surveyed and 23 per cent think of 'loss' while yet another 20 per cent think of it as 'uncertainty', as per the survey. Perceptions that risk can be thrilling (16 per cent) or can lead to opportunities (8 per cent) are limited to less than a quarter of the investor base. According to investor perceptions, volatility is the most important 'problem' associated with the stock markets while the fear of losing money and the lack of guaranteed returns are also primary reasons of concern. It seems that investors are interested in participating in the securities markets and yet hope to avoid any market risk. On the other hand, they are willing to ignore non- systematic or operational risks like corporate governance issues, potential accounting fraud or trading on inside information, and thus, show a biased view of risk of financial securities. The survey was commissioned in 2015 and got completed last year, while its results were released today by the capital markets regulator. Nielsen, a global leader in primary research, has conducted and analysed this Sebi survey. Sebi said the survey first listed a set of 2,04,694 households and basic information about demographics, income, savings and investments were collected. In the second step, a subset of 50,453 amongst these listed households were chosen to conduct the final survey. The data was used to create an estimate of the total number of investing households at the end of 2015.

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