The stock market can also be a fun and profitable way to enhance your wealth. To many novices, however, the very concept of a stock market seems to be too intimidating. That said, anyone can invest with the right information and support, and secure their financial prospects. Therefore, to ease such fears, we have prepared this useful guide on how to start investing in the stock market, aiming the Indian audience, introducing its ideas, actions and helpful suggestions in the correct order.
What Is Stock Market?
Stock Market refers to a global network of economic transactions, different financial instruments include stocks, bonds, and beneficial ownership certificates. Purchase of shares of any company means buying the stake in that company. The profits accrued to the company will also increase the worth of shares owned by an individual which in turn appreciates their investment.
In India, there are two of the largest exchanges, The Bombay Stock Exchange and The National Stock Exchange. These exchanges help in the buying and selling of shares in a systematic manner with all the necessary safeguards.
Reasons for Investing in the Stock Market
There are several reasons why individuals consider putting money in the stock market that gives them an upper hand over other types of investment.
Higher Returns:
In history, the stock markets are bedecked with higher returns as compared to keeping money in ordinary ways of investing while living such as saving accounts, bonds, or deposit money.
Owning Part of a Company:
When you purchase stock, you are purchasing a chunk of the corporation. Your shares are worth more as the corporation expands.
High liquidity:
Stocks are easy to buy and sell therefore making them a liquid asset. This means that one does not have to worry about tying up their money for long periods.
Risk reduction:
Investment of all such equities helps one to hold investment in more than one sector and decline risk
The Comprehensive Guide for a Beginner to the Indian Share Market
Step 1: Establish Your Investment Targets
It is very important to know your financial objective before investing. Why do you want to invest – to create wealth over time, for a definite purpose such as buying a house or getting an education or for quick profit? Your investment goals will help you to understand, the risk that you can take, the category of shares that you can consider investing and the period that you can afford your investments for.
Step 2: Getting a Demat and a Trading Account
For an investor to participate in the Indian stock market, he or she requires the following two basic accounts:
Demat Account:
This is the account that stores one’s shares electronically. One can think of it as a safe for stocks containing the stocks, albeit in wafer-thin electronic form. India does not allow ownership and transfer of shares without a demat account.
Trading Account:
This is an account that allows buying and selling of several stocks. It links the customer to the stock exchange via a broker.
To open these accounts, you will need to reach out to a stockbroking firm or a stock broker. There are plenty of stockbrokers both, the conventional type of stock brokers and the internet based stock brokers and such stockbrokers provide services to investors. Some of the famous stock broking companies in India are Zerodha and Upstox and also ICICI Direct and HDFC Securities.
Step 3: Select Appropriate Equities
If you are a beginner, you might be intimidated considering the large quantity of stocks on offer. Here are some guidelines regarding stock selection:
Use the ‘Large-Cap’ Stocks First: Large-cap stocks are shares in corporations of high financial stability which are well known. Companies such as Reliance Industries, Tata Consultancy Services Limited (TCS) and HDFC Bank are examples of such firms. These types of stocks are quite safe but are associated with low growth rates as compared to their younger counterparts.
Step 6: Keep a Close Watch on Your Investments and Assess Their Performance
Also, after you’ve made your investments, it’s wise to monitor the portfolio’s performance from time to time. Watch out for news about the companies, as well as quarterly earnings and changes in the markets. It is also recommended to evaluate your portfolio periodically in order to check whether its contents are in line with what you intend to achieve.
Basic Tips for First Timers
Do Your Own Research:
Don’t do what everybody is doing or what a friend says or what is said in social media. Make decisions based on your own research.
Bide Your Time:
Short-term fluctuations in stock prices are normal and may make one nervous but this is not the case with the long run.
Do Not Make Decisions Based On Emotions:
The most dangerous features of investors are fear and greed. Do not overreact to the rises and falls in the market.
Do Not Lose Touch:
Make it a point to read the papers on financial and stock markets everyday, and especially the views of the experts.
Summary
Though it is possible to make a considerable amount of money through the Indian stock market over the years, doing so requires a great deal of patience, discipline and learning. You should think big, but invest small and learn how to invest with a time horizon of many years. In course of time, u shall gain the knowledge and capacity to make timely investment decisions, control their risks and increase their capital.
Let’s face it, the consistency of the strategy one employs, and the fortitude with which one adheres to their investing objectives are the most crucial in the achievement of one’s investment goals. Therefore, get on board the investment app today, and take that very important first step towards achieving financial freedom — investing in the stock exchanges!