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Basics of Investing: How to start investing in stock markets?

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One of the major benefits of investing in the stock market is growing your wealth over a period of time. Investing is a way to keep aside the money and let it grow to reap the benefits in future. Stock market investing can help you meet your long term and short term goals. This is possible only by choosing the right stock and choosing the right duration to hold that stock. If you don’t have the right knowledge or understanding and just invest randomly, you may end up losing all your savings.

For anyone, who is making a new start or has never invested in the stock market before, the whole process can be a little intimidating. But now there are many brokerage houses that have made it really easy to start investing, and also help you to take the right calls.

Here are the 10 steps to follow to start investing:

1. Choose a stock broker

A broker will help you to open a trading account in which you can buy and sell your stocks. You can enquire about the account opening procedure and documents needed. Now-a-days the account opening procedure is extremely easy and your account can be opened in just one day. Every broker charges you a certain fee for their services. You can compare brokerage rates of different brokering companies and choose your broker. A good broker is needed to help you set a good portfolio to achieve your investment plans.

2. Set your budget

There is a misconception that you need a sizable amount of money to start investing. You can start investing with as little as Rs 100. In order to invest regularly, check your monthly expenses and factor in a fixed amount that you plan to invest. A monthly investment of Rs 1000 can go long in creating a good portfolio. Never invest money that you can’t afford to lose.

3. Select your Plan

It is important to set a strategy for your investment. Will it be for short term or long term? Some investments need time to grow, it is best to buy and leave them or not to look at them. Whereas some investments need to be monitored regularly or even several times a day. Your choice of investment will also depend on this.

4. Know your risk tolerance

Everyone’s risk taking capacity is different. Some get anxious with small risks whereas some don’t. So if you are a beginner, avoid investments in instruments that make you anxious.

5. Gain some basic knowledge

This is the most critical step and should be followed rigorously. Educate yourself continuously and before every investment. It is advisable to study some basics before stepping in the big game. Read a book or some online articles or follow some blogs with good and easy to understand contents, you may also read some newspapers or watch some news channel or show to get a hang of the stock market words and factors that keep affecting the markets.

6. Invest in stocks that you understand

Investing in a company or business that you know is always better than a company whose business you don’t understand at all. You will be able to use common logic for companies you know and can relate to and thus take a better call.

7. Do not trust rumours and unregistered sms

Never invest blindly on unregistered sms or rumours. Always take an informed decision to avoid making losses. Do a small check or study or take help from your broker before investing in any stock.

8. Invest regularly, have patience

Investing regularly is the key to growing your portfolio for the future. Do not stop investing because your stock isn’t doing well or stop after earning handsome returns. In a bad market, control your fear, don’t panic and sell at loss.

9. Do not run behind profits

It’s never a good idea to be greedy. Have realistic expectations from your investments. Just because one stock did extremely well doesn’t mean all will. Do not run behind profits. A call of exit or entry in a stock should be taken with the right knowledge and not with false hopes. If your account is with a full stock Broker he can help you better on this part.

10. Be disciplined and follow your plan

It is very important to follow a routine and build strong investment habits. Do not change your investment plan if your portfolio is doing good or bad. Do not exit stocks that are bought for long term just because they are doing good or start investing more in them. Stay focused and follow your plan.

The Multi-billionaire investor Warren Buffett has always followed one rule for investing in the stock market,

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1”

Warren Buffett

Never lose money. Stay rational and stick to your homework when researching businesses in which to invest. An advice one should follow but often forgotten.

You can connect with Marwadi Shares and Finance ltd. to start investing with us.

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