Investing is lucrative, but may not come easy to newbies in the stock market. As the profits one can earn from investing diligently, there are high risks too. As a young and new investor, one must know a few things to avoid any financial trouble. Becoming a good investor with knowledge of everything in the stock market cannot be done in a day and requires time and patience. Let’s take a look at how and what a new investor should learn about investing.
A Beginner’s Guide to Investing in the Indian Stock Market
The process of investing in stock markets is quite simple. Below are a few steps that investors need to follow to trade in the Indian stock market.
- Step 1: Open a Demat account online and link it with a pre-existing bank account so that the transactions can take place perfectly.
- Step 2: Set up your Demat and trading account and log in to the same with the help of various mobile-based online platforms.
- Step 3: The selection of the shares you want to invest in is most important. With enough funds, you can buy or sell the shares you want.
- Step 4: Once you have decided where to invest, complete the transaction by specifying the number of shares you want to purchase.
- Step 5: The purchase order will be successfully executed when the seller accepts the order.
The process of investing does not end with purchasing a stock or after a few investments. Regular monitoring of the portfolio and keeping up with the trends in the market is necessary.
Factors to Consider Before Investing in Stocks
Set your Investment Goals
Attaining your investment goals becomes easy when there is a coherent plan. With the help of planning, investors can avoid many pitfalls. Define your financial needs and start investing accordingly.
Know your Risk Tolerance
There are different types of stocks in the market with varying risk factors. Even though stocks with high risk have a high return probability, it is not ideal for every investor. Investors with low-risk tolerance should opt for defensive stocks.
Understand the Investor Profile
Analysing your investor profile will help you understand the best-suited investment options. This gives an insight into the right investment path for each investor.
Diversify your Portfolio
If you want to have a healthy investor portfolio, diversify your investments. The benefits of a Demat account that is not dominated by a particular type of security are more than investing in one particular stock. A balanced portfolio will protect you from a financial crisis.
Stock Market Terms a New Investor Should know
Like any other subject, there are some basics to know while investing. Below are a few terms every investor must know.
Stock
Stocks are equity that gives percentage ownership of the company to an investor.
Investment Portfolio
A portfolio means the collection of different financial investments such as bonds, mutual funds, shares and more.
Asset Allocation
Any investment that will yield returns to an investor is called an asset allocation. Asset allocation can be in the form of securities ranging from shares funds to treasury notes.
Bear Market
A market situation where the share values are receding is a bear market.
Bull Market
When the market is rising and the stock values are high, it is a market situation that is favourable to investors.
Prospectus
A legal document that provides insight into the finances and expenses of a company is called a prospectus.
Bottom Line
Starting to invest in financial markets in your twenties is ideal. Investing early on helps a lot in the long run. As the investment tenure is long, one can start by investing less. Unnecessary spending reduces exponentially by having a habit of investing. There are various resources available from which one can learn and analyse the right way to invest in the stock market. Even though there is no book rule in investing, there are a few tried and tested methods that one can rely on to become a successful investor.