What is Stock Market and how a fresher can start investing
Stock Market
The stock market is where investors connect to buy and sell investments- most commonly, stocks, which are shares of ownership in publicly listed companies.
The term "stock market" refers to the major stock market indexes, such as the NIFTY 50 and BSE SENSEX, because it's difficult to track every single stock. These indexes include a section of stocks and their performance is viewed as representative of the entire market.
In news headline you might see that says
the stock market has raised, fall, or the stock market closed up or down for
the day. This means stock market indexes have moved up or down, meaning the
stocks within the index have either gained or lost value as a whole. Investors
who buy and sell stocks, hope to get a profit through this movement
in stock prices.
Investment in the stock market is most often done via Stock Brokers through electronic trading platforms.
Required steps to start investing
You need to complete few basic works to start investing. Here
is the guide to help you out:
1. Bank account
You should have your
saving bank account in any private/public Indian bank.
2. Choose your stock broker and open a Trading and De-mat account
Deciding on an online broker is one of the
biggest steps that you need to take. There are dozens of brokers out there, that offer hundreds of
features. Each broker has its own pros and cons. You can compare India's top stock brokers side-by-side, and choose the
one that matches your needs.
For opening a de-mat and trading account (most
brokers offer altogether and called 2-in-1 account), the following documents
are required:
Ø PAN Card
Ø Aadhar card (as address proof)
Ø Cancelled cheque/Bank Statement/Passbook
Ø Income Proof (Bank Statement / Salary Slip/ De-mat holding
Statement/ Networth Certificate)
3. Computer/mobile
4. Internet connection
Investment procedure
When you enter to the stock market as a beginner you might have a lot of
dreams and expectations. You might have projected to invest your savings and
make your capital double in few months, and make lakhs in return.
Although there are hundreds of examples of people who had created huge
wealth from the stock market, however, there are also thousands who didn’t.
Here are a few points to aware people who are just entering the world of investing.
1. Invest only the extra cash
Only invest the extra amount of money that won’t affect your daily life. In addition, investing in debts/loans is really a bad idea, especially when you are new and learning how to invest in the share market.
2. Define your investment goals
Do you want to grow your savings to get higher returns? Do you want to build a passive income from your investments through dividends? Are you investing for a specific goal? Or do you just want to learn a new skill, have fun in the market along with creating wealth?
If you want to just have fun and want to learn the skill, that’s okay.
But make sure that you do not over-invest or get too much attracted to the
market. Moreover, most people start the same way and define their goals later.
You must know what you want from market. It’s important to start with defining your investment goals. Start with end goals in mind before investing.
3. Screening and Filtering the right stocks using Financials
Ø Industry analysis
Ø Quality of Business Operations and Management,
Ø RoE
Ø EPS
Ø PE ratio
Ø Analyse company’s annual and quarterly reports
Ø Evaluate Balance Sheet
Ø Quality of earnings
Ø Select only the companies (Business) that you understand
Ø Find Low Debt Levels Companies
4. Pick investment strategy
As you know your goals, selected stocks,
you need to have your strategies. You might need to think out whether you want
to invest a large amount or Systematic investment plan (SIP) in the approach.
If your savings goal is more than 20 years (like retirement),
almost all of your money can be in stocks. But picking specific stocks can be
complicated and time consuming. So for most people, the best way to invest in
stocks is through, index funds or ETFs.
If you’re saving for a short-term goal and you need
the money within five years, then you'd invest in low risk associated stocks to keep your money safe, in low-cost stock mutual funds or low-risk investment portfolio (Blue chip stocks).
If you are planning small periodic investments, analyze how much you want to invest monthly.
5. Find right price to buy the stock and start investing.
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