Hey there! Are you wondering how to invest in the stock market? Are you stuck on which company to invest in? Or what is the process to invest in the stock market? Where to start and which security to buy? Do not worry now, my friends. In this article, I will enlighten you on the basics of How to invest in the Stock Market.
Firstly let me put a disclaimer that in no way am I guaranteeing that you will get returns in the stock market after following the basics. A stock market is a tricky place where one has to be careful all the time. It will help if you have a good knowledge of stocks and if you don’t know, you can learn the stock market by reading books and joining a stock market course.
Let us get on with it then.
The process of investing in the stock market.
1 CREATE A TRADING ACCOUNT
Start by creating a trading account or a Demat account. A Demat account will hold all of your securities in electronic form or Dematerialized. Creating a Demat account is super easy and can be done online too. There are a lot of brokerages that provide this service, and even banks offer this service. Examples of brokers that provide Demat services are – Zerodha, Angel Broking, Edelweiss, etc.
2. HIRE AN AGENT
Once you have successfully created your Demat account, hire an agent or a broker that will trade securities for you. These people also provide suggestions and valuable insights. Agents and brokers are available easily online. There are large brokerage houses as well.
3. ANALYZE YOUR REQUIREMENTS
Before you create your portfolio to invest in, analyze the various aspects of your requirements. These may include your primary stream of earnings, your financial needs, the time period you are willing to invest for, the market you want to invest in, and so on. This will help you in having a clear understanding and will help you in making better investment decisions.
4. MAKE A PORTFOLIO
Once you have analyzed your basic requirements, start building a portfolio. Building a personal portfolio has many advantages like the flexibility to change any share, highly compatible with your needs, you get to learn a lot of things along the way, and so on.
Begin with picking the shares that will meet your requirements (which you have analyzed). Be sure to choose at least a good 20-30 shares to have a backup shortly. Out of those 20-30 shares, pick the top 10-15 shares that resonate with your various needs.
You will have to employ some risk-aversion techniques like diversification of your portfolio. In this method, all you have to do is select companies from different sectors, industries, and even companies from other geographical locations. This will reduce the overall impact of risk on the portfolio.
Many other techniques can be used, for which I will suggest you take up some stock market courses. Many institutes provide these courses, but I will highly recommend The Thought Tree (T3) as they provide free mentorship to the students.
5. START INVESTING
There are levels to this step. One does not outright start investing his/her money after successfully creating a portfolio. Before investing, observe the stocks included in your portfolio and the overall market conditions for at least 3-4 months. This ensures that your observation skills are sharpened, and you are up to date with everything going around in the stock market.
Next comes selecting between systematic investment (SIP) and one-time lumpsum investment.
I prefer SIP, which is Systematic Investment Planning. In this method, a person invests his/her capital in monthly instalments rather than in one go. This reduces overall risk and maintains an average cost.
6. OBSERVATION
Once you start investing real money in the portfolio you made, keep on observing the movement of your portfolio in relation to the market. This will help you in replacing any stock that may not be adhering to your requirements anymore.
Also, keep an eye on events happening across the world. Any small rumour or event can cause drastic changes in the stock market. For instance, the news surrounding Israel and rocket attacks have affected stock markets all over the world.
Read More: Procedure for Share Transfer in Private Limited Company
7. PATIENCE
Only investing in the market is not enough. There are layers to this. It would help if you were patient as hell. It may take years before you get your desired return. Patience is essential for longevity in this business, as in any other business. So, along with observation, you have to build your patience as well.
That is it for now. I hope you guys took something meaningful from this article. I suggest joining a stock market course to expand your knowledge.
Also, stay inside your homes. Carry a sanitizer and wear a mask every time you step out. Stay safe.
Thank you for reading my article. I appreciate it.
