The stock market is a virtual platform where stocks, shares or securities, and many other financial instruments are bought and sold by traders and investors. Many individuals nowadays are eager to learn more about the nuances of the stock market and how to make money out of it. If you are one such person and if you have not started on your stock market journey, then read on to know the basics of how to invest in the stock market.
Before we move on to the content, here are the points that will be mentioned.
- Prerequisites
- Accounts
- Stockbrokers
- Basic pointers
First and foremost, know that you should be 18 years and above to invest in the stock market. That's the only limitation for aspiring young investors. But apart from that criteria, there are certain things that you would require to get started. For example, you will need your PAN card, Aadhaar Card, Savings account details, and passport size photos. These details will be needed to fill in the application for opening a Demat Or de-materialization account.
Now, you might have heard of this Demat account. Treat them as an account to store all your stocks and securities. I mean, think about it, you can't store them in the money form in your savings account now, can you? So, therefore, a Demat account is imperative to start trading. And to store your stocks in their digital form. Now there are also trading accounts, which are basically like a platform that enables you to trade stocks. So both of them are required.
The next question that you might have is where to get these accounts or how to open them. This is where stockbrokers come in. There are two types of stockbrokers, namely, traditional and budget brokers. As the name suggests, Traditional brokers offer more services but are more expensive. On the other hand, budget brokers might not provide all the services, but they are cheaper when compared to the former.
Now, as a beginner, you can research various stockbrokers and their commissions and discounts. Traditional brokers will usually be banks, and Budget brokers will be SEBI accredited private agencies.
Now since the basic requirements are out of the way, you might want to brush up on your fundamentals of the stock market. Learn about investments and trading, and try to understand the jargon that investors use. But of course, that might take some time. Meanwhile, you can practice a bit on virtual trading platforms with play money. Or you could start small.
But before you start investing, here are some points to keep in mind.
1. Define a financial goal. You should clearly define what you want the money for and when you what it. If you are minting money for your retirement or for buying a house or even for World travel, each of them has got different time frames, and depending on that, you have to choose where to invest and how much.
2. Invest your dead money. Invest with the amount that you are sure won't cause you any financial troubles or burden. You don't want to get into the stock market with the hope of making double the investments so that you can pay off debts. That will be a wrong and risky move.
3. At the same time, stash some money away as an emergency fund. It would be best if you didn't have to earn from the stock market to live your daily life. Because stock markets are subject to risks and may cause heavy losses.
4. Selection of stocks. There are thousands of stocks in the stock market. And it's up to you to find out and figure out in which stocks you should invest. For that, you will have to research extensively and gather information regarding the company of your short-listed stocks.
5. Choose the right stocks to invest in. You can start as small as Rs 500 rs Or Rs 1000. And since you are a beginner, instead of trying to make money focus on learning the know-how. To start with, you can start investing in blue chip stocks. Some companies have established their foundations and have been around for a long time. They also have a steady growth rate. Therefore, investing in such stocks can limit the risks.
6. Diversifying your portfolio. A portfolio is an individual's collection of investments. While choosing stocks, make sure that you choose stocks from different industries. Therefore, even if an industry is performing poorly, your stocks in other industries can get you returns.
7. Plans and strategies. There are numerous tools in the market that can help you to predict the stock prices and their trajectory. Please make use of them and try to learn how to use them effectively. Technical analysis and indicators are the go-to tools for even the most experienced investors and traders.
8. Emotions. A major flaw in newbie investors is that they might be too emotional. But when it comes to the stock market, you must be as rational and hard-boiled as possible. Because, sometimes, our hearts will say that the prices of a stock in a downtrend will increase. In such cases, instead of praying for it to rise, you could analyze the stock rationally and see if it will indeed rise, factoring in all the stock market variables. So don't be greedy as well as disheartening.
9. Track your investments. You shouldn't just go and do something else after making the investments. Instead, you arbitrarily check them to see if they are on the right path. If you are a long-term investor, small fluctuations shouldn't be much of a concern. But if your time frame is short and if the prices keep dropping, order a stop loss and stick to it.
10. Don't follow the herd. Or even wannabe stock market influencers who gives tips and tricks to win over the stock market. Mostly this information can be biased and may not work out for everyone. Therefore, you do what you think is right for you. And not because the majority is doing it.
Having said that, now you might know what to consider while investing in the stock market. But of course, this is just the tip of the iceberg, and if you want to know more, then the information is all freely available to you on the internet.
