This is a beginners guide to learn How to Invest in Stock Market.
Investing in the Stock Market is one of the best ways to grow money. One of the biggest misconceptions about the Stock Market is that only rich people can invest in it.
This prevents amateur investors from investing in Stock Markets at the right time and instead they focus on saving more.
In actuality, people can invest as low as INR 100- INR 500 in Stock Markets. It’s not necessary for people to invest only in big amounts.
How to Invest in Stock Market? – Basics
There are three aspects that an investor needs to focus on:
Set Financial Goals – Firstly, they need to have their financial goals set. They should know why they are investing, where are they going to use those funds, if they are saving for their grandchildren, etc.
Based on this, an investor will get a clear idea about the need for investment.
Risk Assessment – Secondly, investors need to have a clear assessment of how much risk they are willing to take. This is a very important aspect because it aids the investor in choosing the right kind of investment.
Investment Horizon – Thirdly, the investor should analyze their investment horizon. Generally, it is observed that the stocks return good values after 7-10 years but on the basis of their investment horizon, they can invest in those stocks which can provide reasonable returns.
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How to Invest in Share Market? – Things to Consider
It is not necessary to be an expert in this field, but one should always know the basics.
One should have a clear knowledge about how the market functions and which factors influence the performance of stocks before investing money in stocks.
Focus on Savings
Savings seems to be a very tough task but it’s not as tough as it seems. All one is expected to do is start. Creating a budget helps in this a lot.
Even if someone saves INR 2000 – INR 5000 a month, it is enough to start investing.
Investing in the Stock Market is not a sprint race. It’s more like a marathon. One needs to start investing and stay active in order to raise them at the right time.
If someone wishes to invest INR 1000, they should analyze and choose the best stock which falls in that budget.
Slowly and gradually, as the investment will increase, the concept of the Stock Market will also hone. This will help the investors in creating their own portfolio of stocks.
Beware of Penny Stocks
Penny Stocks are kinds of shares that are available for INR 10 or less. Not all penny stocks are bad, though.
However, most of the times, it has been observed that these stocks are priced low. It is because, either their demand is less or the company that is selling them is almost on the edge of collapsing.
Decide How to Invest in Stock Market
One can either choose the stock and mutual funds for themselves or they can take help from someone to manage the entire process.
It is advisable to take help in case the person willing to invest is an amateur.
However, if the person has a piece of good knowledge of the Stock Market, they can easily choose the stock and stock funds for themselves.
Once a person gets the preference set in their mind, they are then ready to invest in Stock Markets.
Open a Demat Account
If one wishes to invest in Stocks, they need to have a Demat account. For someone who doesn’t need any help, they should open a brokerage account.
For those who need help in opening an account taking the help, you can check here for Best Stock Broker in India.
Opening a Demat Account: Brokerage account offers the quickest and cheapest way to purchase stocks, funds, and various other types of investments.
With a broker, one can also open a retirement account or a taxable brokerage account.
Opening a Robo-Advisor account: Robo-advisor offers complete investment management. They ask about the long-term goals from the investors and according to the information collected, they build a portfolio so that the investors achieve their aims.
This may sound a bit expensive but the management fees are very low. Most of the advisors charge as low as 0.25 percent from the investor’s account balance.
Where to Invest in Stock Market? – Shares or Mutual Fund
Mutual funds help investors to buy small fragments of different stocks in a single transaction. There are also some mutual funds that help in tracking index, these are Index Funds and ETFs.
When a person invests in funds, he also owns the small pieces of each of the firms involved. These are also known as equity mutual funds.
A stock refers to the ownership certificate of a company. There are usually two types of stock. They are preferred stock and common stock.
A person who holds preferred stock does not have the right to vote at meetings but, he earns more as compared to the common stock which provides the right to vote but has lesser earnings.
How to Invest in Stock Market? – Relevant Questions
Here are some of the frequently asked questions on how to invest in share market in India.
Q1. How can Beginners Invest in Shares?
Answer – Everything that has been discussed above is for amateur investors but in case the beginners need any advice, it is that investing isn’t as tough and complex as it seems.
The reason for it not being tough is that there are various types of tools available. Investing Small & learning through experience is probably the best way to invest money for beginners.
Another option is to take help from Full Service Brokers, Financial Advisors or Robo-Advisor Tools which helps in making and managing the portfolio for investors for a very low charge.
Q2. Can I Invest in the Stock Market with Small Amounts?
Ans – As it has been observed, there are two challenges that investors have to face in case they are thinking of investing small amounts.
However, the good news is that both of these can be easily conquered.
The first challenge is that many big company shares are traded at high amount and the second challenge is that it is somewhat difficult to spread small amounts in multiple stocks.
An Investor can start with even Rs.100 as there are many companies which are traded below Rs.100.
But it is advised to Start with Minimum Rs.2000 – Rs.3000 so that you can buy 5 difference stocks on big companies, so that if one 2 of your stocks are in negative, 3 stocks are still positive & can give you decent return.
When you start you 1st Trade, it is better to have so much in investment via which you can buy 1 share of minimum 4-5 good companies to make some profit.
Q3. Are Stocks a good choice of Investment for Amateurs?
Ans – The fact is that everyone including the amateurs should invest in stocks if they are ready to leave their money untouched for at least 5 years.
This is because it has been observed that 5 years is the maximum time when a downturn can last.
As mentioned above, spread your risk by investing in 4-5 good companies rather than spending your entire money in 1 stock.
Q4. Are there any Best Stock Market Investments available?
Ans – The best investments available are probably low-cost mutual funds. These are index funds or ETFs.
By buying low-cost mutual funds, one can probably buy a big piece of the stock market in only a single transaction.
It has been observed that the investors who invest in stocks are often very far behind in the long run as compared to those who have invested in mutual funds.
Q5. How to make an informed decision about where to invest?
Ans – It all comes down to two things. These are how much time one is willing to give and how much risk one could possibly take.
The stock market tends to go up and down a lot and in case someone panics a lot when it goes down, then they should look for investing more conservatively.
If you need an informed decision to invest in stock market, you should consider talking to financial advisors or full service brokers.
Full Service Brokers are a better option as they don’t charge for any advice they offer. You just need to open a demat account with them & they will guide you.
Here are the list of some of the Top Full Service Brokers in India.
Q6. In which Stocks should one invest?
Ans – If you are considering Stock Market Investment & want to know which stock are best to invest, then you should definitely look for a good full service broker or stock advisor.
But for your 1st Step, you should always invest in 4-5 companies stocks & invest in blue chip companies. These companies are big companies & they generally don’t trade in losses for long term.
So, they are safe option for long term. Learn more about Blue Chip Companies here.
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