Stock trading is the best medium where you can employ your money to work for you.
While you aspire to become an intelligent investor, you need to practice the art of investing in the stock market.
With knowledge and experience, you can be the next Warren Buffet or Rakesh Jhunjhunwala.
However, the first step is understanding how to start investing. Well, here’s a quick guide to kick start your stock market journey!
The Beginner’s Guide
If you are new to the world of the stock market, then before investing, you can start with the following points:
Do Thorough Research
This is paramount for stock investment. Before selecting any stock, you shall do thorough research about the company.
If you select the wrong stock, it can wipe off your entire capital invested in no time. Therefore, it is essential to learn how to analyse a stock.
To begin your journey, you can start your investments with blue-chip companies with strong fundamentals.
Set your Goals
This is important because you will select the stocks accordingly. If your goal is to generate active income, this is important because you will select the stocks accordingly.
If your goal is to generate passive income, you should consider investing in high dividend-yielding stocks.
If your goal is wealth generation, then the stocks that pay less dividend would be the ones. The reason is simple.
Funds invested back into the company without being distributed to the investors follow compounding and corresponding wealth creation.
Your risk appetite is essential and directly affects your stock investment selection. Your risk appetite is more when you are young than when you become old.
With a high-risk appetite, you can select small-cap to mid-cap stocks that offer higher returns against moderate-high risk.
In case of a low-risk appetite, you shall go with large-cap companies that essentially include blue-chip companies.
Some Key Points to Kickstart Your Journey
Following are the essentials before you begin your stock market journey:
1) Demat Account:
To invest in the stock market, you need to open a Demat account with a SEBI registered stockbroker.
You can visit the stock broker’s website online and follow the prescribed procedure to open the Demat account.
It only takes a few minutes to open the Demat account with technological assistance.
2) Investing vs. Trading:
People often confuse between investing and trading. While stock investments are focused on a long-term horizon, stock trading is employed by the traders to make some quick profits.
There are different strategies for investing and trading. If you plan for a long-term investment, you are an investor.
As a beginner, you should always act as an investor rather than a trader as trading involves a higher risk than investing.
3) Fundamental and Technical Research:
Fundamental research is when you research the company fundamentals to know the quality of the stock.
Technical research is when you analyse the price movements to predict the future price patterns and movement of the stock.
While there is no fixed rule, generally, fundamental research is employed by the investors, while technical research is often employed by the traders.
Stock market investing, if carefully done, is one of the most rewarding fields. So, buckle up and start your investing journey now!