Who does not want to earn extra or is there any disadvantage to having other sources of income? Let’s talk about stocks if you do not have any prior experience with how to start investing. Here is a beginner’s guide to stock market investment.
A stock market is a market in which stocks of various companies are listed and traded. The exchange of these stocks takes place in the stock market where investors and buyers invest or buy stocks for profit.
Fortunately, it’s not an easy task to invest in the stock market and become a millionaire, and if it could be so then everyone would have become so.
With proper knowledge and systematic investment in the stock market, you can grow well.
However, a large percentage of the Indian population does not invest in the stock market due to a lack of basic knowledge in the field. So in this article, we’ll be talking about the stock market basics of investment in India.
A. What is a Share?
A share or a company’s stock is a portion of the company’s total ownership. shares and stocks are a way to buy any company’s ownership to an extent. purchasing any stock of a company makes you the shareholder of that company.
B. Here comes the question, why do companies sell their shares?
Money is the blood for any business firm to continue its operations. When companies run out of liquidity then there comes the need of raising funds or capital for various purposes including payment of employees, extending the business, buying or renting office space, settling debts, and more. And one of the best options companies have is to raise funds by selling part of the ownership of the company in the form of shares.
The stock market functions are primarily managed and monitored by governing authorities such as the Securities and Exchange Board of India(SEBI).
C. Difference between short-term and long-term investment – How should beginners choose?
For beginners, one of the most confusing parts of stock trading for novices is understanding the investment horizon, which is the period they are willing to keep their investments. There are two investment horizons: Short-term and Long-Term.
● Advantages of short-term investment:
A short-term investment is when an investor buys securities for 3-4 months. This type of investment allows you to make quick and enjoy profits for personal benefit. The benefit of such short-term investments is that you do not need to wait for a long time to enjoy the benefits.
● Advantages of long-term investment:
Also called value investing, when you buy securities for many years that ensures you mitigate stock market risks as they multiply over time. Such long-term investments provide the best value of securities to the investors as the extended period increases the potential for better profits.
Both investment types are ideal depending on the investment benefits and risk involved. To make quick profits that also include high risk, invest your money in short-term investments without keeping the invested money for long. And If investors don’t want to take on high risks and invest for the future then consider value investing. A mix of both can be an ideal strategy to understand the share market as a beginner.
D. A step-by-step guide to the stock market for beginners
The process of investing in the stock market for novices also includes proficiency in the process of exchanging securities. So here is a quick step-by-step process to understand the stock market.
1. Determine the right type of investment:
The first step is to choose the type of investment among multiple available options such as stocks, mutual funds, bonds, derivatives, etc. It is advisable to understand before deciding.
2. Open a Demat account:
A Demat account, also called dematerialized account, is an account that is important to hold your securities in an electronic and secure form. Therefore, it is required to open a Demat account before investing in the securities. And It is a wise analyzer and analyzes various stockbrokers before choosing one for opening a Demat account.
3. Figure out the stock options available:
Researching the chosen type of investment is necessary to mitigate losses and improve the profit potential. You can research and study the chosen security through newspapers, TV channels, or information available by the stockbroker.
4. Make investments in stocks that best suit your target:
You must make investments in stocks or other investment products after setting an investment goal. The goal will ensure you select an ideal investment horizon, investment amount, security, and risk appetite.
5. Scrutinise your portfolio from time to time:
Once you have invested in a security based on an investment goal, it is vital to monitor the portfolio regularly. Monitoring helps in understanding the performance of your investments, reducing losses, and identifying stocks that are doing better for further investment.
6. Keep an eye on the trends and fluctuations:
The prices of the listed securities in the stock market fluctuate regularly which makes it essential to understand the trends of the market by staying up to date with the current happenings in the stock market. It also allows better decision-making considering existing and future investments.
E. Best Stock Trading Platforms for beginners-
stock trading platform for beginners:
- eToro
- Weibull
- Robinhood
- SoFi
- E*TRADE
- Acorns
