Introduction – How to Invest In Stocks
How to Invest In Stocks: Quick-Start Guide for Beginners
Introduction
The stock market is not everyone’s cup of tea but that does not mean you can’t own it. Once you have a knack for how to analyze and invest you can be the next investing guru of the stock market! To be considerate about how the stock market works, you need to have an understanding of the technical jargon, the types of investment, the ways of investing, its mechanism and more.
This one is for you, yes for beginners who are willing to learn about the stock market and want to know the various ifs & buts of it. So, the stock market is a place where you invest in the company’s stock and get ownership of the company. While investing, your vision should be that the company will perform well in the coming times and you can extract profits out of your investment. Keep in mind to have a diversified portfolio while investing in the stock market.
Feeling confused? Not anymore, this column will help you discover how to invest in the stock market like a complete guide for beginners. Let’s start with the basics of starting to invest in the share/stock market.
Basics of investing in the share market
For a beginner to start their investing journey, there are a few things to set up first. Below are the 5 steps which you should answer first before getting into it. Also, investing in the share market is the investment you made in the publicly listed companies which are registered on NSE & BSE- the 2 stock exchanges of India.
Here are the 5 steps to follow before making the first move!
- How would you like to Invest?
The first step is how you would like to invest in the stocks/funds. Most likely there are two ways of investing in the stock market – first is when you trade(buy/sell/hold) on your own and the second is when you communicate your investing goal to a certified person and ask them to handle your trading account. For a beginner, it is advisable to take assistance from the depository participant to help you make the right choices but again, if you know enough, you can buy stocks on your own. Too!
Every stock broking firm has its stock advisors who help individuals in achieving their investing goals. So the next step will be about where you should open your trading account aka Demat account.
2. Choosing an Investing Account
Now it’s the time to choose your investment account also known as the Demat account which you open with the help of a brokerage firm. There are a lot of options available in the market for you to open a Demat account. You can see which one suits the best to you and offers more perks and with a few documents, you can set up your Demat account and start buying/selling the stocks. Further, to open your account, keep the below-mentioned documents handy with you so that the process to open the account will be hassle-free for you.
- PAN Card
- Aadhaar Card
- Cancelled cheque from your active bank account
- Proof of residence
- Account statements
- Passport-size photographs
Not to mention, there are plenty of brokerage firms available in the market like Zerodha Kite, Groww, 5paisa, Angel Broking, IIFL, etc. which can help you open a Demat or trading account with them.
3. Know about Investing in Stocks & Funds in the Share Market
You can purchase a single share or a small number of shares/stocks if you’re interested in a specific firm. It is feasible to create a diversified portfolio consisting of numerous individual equities, but it requires a considerate investment and extensive research. If you choose this path, keep in mind that there will be ups and downs for particular stocks. If you choose to invest in a firm’s stocks after doing your research, if you get nervous on a bad day, remember why you chose that company in the first place.
Moreover, with mutual funds, you can buy a variety of equities in small quantities all at once. ETFs and index funds are two types of mutual funds that follow indices. When you contribute to a fund, you also acquire a stake in each of those shares. For a beginner to create a diverse portfolio, combine different funds and invest in them to mitigate the risk of the share market.
4. Your Budget while Investing and Trading
Deciding your investment budget is quite crucial as it signifies a few things like your risk-taking capacity, your ability to invest and how much you can extract from it by investing in the share market. Buying stocks via a trading account is not the trick but how much & for how long you should buy is the thing that a beginner should look forward to.You have the choice to either make the investments in stocks only or a combination of both stocks and funds. First, learn about how to invest and then decide the right combination depending upon your expenses, savings and risk capacity. A beginner investor aged 30 may invest 80% of their portfolio in stock funds and the remaining 20% in bond funds. Keep these to a minimum as a general rule of thumb for your investment portfolio- just a piece of advice!
5. How to build your Stock Portfolio
But first, how much investment do you want from your stock portfolio? There will be moments when you need to check up on your stocks or other investments, even though worrying over daily changes won’t do much for the health of your portfolio or your own. If you use some techniques to acquire mutual funds and individual stocks over time, you should periodically review your portfolio to make sure it still meets your investment objectives.
Some things to think about: If you’re close to retiring but are a beginner in the stock market, you might want to invest in some of your stock assets to generate more conservative, fixed-income investments. Consider buying stocks or funds in a different sector to increase your portfolio’s diversification if it is overly concentrated on one industry or area.
Crucial Tips for Beginners before Investing
- Objective of your Investments
Your objective determines everything, whether you want to make the share market income as your active or passive income. Based on that, decide your financial goal and then you’ll be advised to pick the stocks to buy for investment that could help you achieve those objectives.
- Diversification
Indeed the most important thing is investing in the stock market with diversification. Read and learn more about the stock market and then make the most diversified portfolio by investing in the stocks which are volatile and non-volatile.
- Risk Appetite
Your risk tolerance is yet another crucial consideration when making stock investments. Low-risk investors could think about buying defensive equities/stocks, which offer steady returns and are less affected by market volatility. You can go for the volatile ones too, perhaps know your risk-bearing capacity first.
Best Stocks for Beginners in the Stock Market
The versatility of the Indian stock market is phenomenal in terms of entertaining everyone, whether you’re a beginner or an expert, it fits all! For beginners, it is suggested to take advice, learn and then imply that in their trading. It will help in
Tip: Investing in “large-cap” stocks, the largest and most financially secure companies/industries can be worthwhile if you want to move beyond index funds and into individual stocks. To avoid purchasing expensive stocks, look for businesses with a proven history of increasing revenues and profits over the long term, minimum debt, and trading at fair prices.
Following Aug 2022, you can look for these stocks to buy-
- Bajaj Finserve
- Coforge
- Infosys Ltd.
- Jubilant Foods Ltd.
- TCNS Clothing Company
Know more about these companies from the NSE & BSE websites or other credible websites for investing in the stock market.
Conclusion
The best thing about investing nowadays is that, even if you don’t know much at first, you can do it in a variety of ways and on your terms. Either do it on your own or hire a professional to do it for you. You can make an active or passive investment in stocks, or mutual funds. Pick an investing strategy that suits you and increase your corpus. However, investing in the stock market has no right time, 50 years is as good as 25 years. Just the right guidance, right shares and the right time are essential. A trading guru is a guru because he knows the analysis and the next most predictable move of the respective company’s stock. So, take a leap of faith and open a Demat account of your choice, follow the steps and you’re ready to begin trading!
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