How to Start Investing in Share Market – Step by Step guide for Beginners
Stock Market attracts everybody due to its potential to give great returns on your investment. Do you want to know how you can start investing with few simple steps? Continue Reading……
If you are reading this article, it means you also want to start investing in Stocks. It is very obvious you may be having so many questions in your mind such as What is Stock Market? How to Start investing in Stocks? where to open your demat and trading account? and How to Buy and Sell Stocks?
You need not to worry because in this article we are going to guide you to answers of these questions in very simple language and we will discuss all major steps so you could start investing in share market on your own.
So let’s start with the basic question
What is Stock Market?
Stock Market or Share Market is a place where shares of listed companies are traded. There are different players, participate in Stock Market such as Investors, Traders, Brokers, Exchanges. Stock Market can be categorize in two types
Primary Market: Primary market where shares of a public company list for the first time through Initial Public Offer (IPO).
Secondary Market: Where shares of already listed companies are traded. It means where buyers and sellers of shares of listed trade with each other at market price or at any price pre-defined by them (in case of Block Deal or Bulk Deal).
What is Stock Exchange ?
Stock Exchanges : There are two Major Stock Exchange in India. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Stock Exchange provides platform to market participants to buy and sell stocks and securities.
What is Sensex and Nifty
Sensex Index is major market indicator of Top 30 Companies listed on BSE. Nifty Index is major Market Indicator of Top 50 Companies listed on NSE.
So you can see the dream run of SENSEX is still continues. Indian Stock Market have outperformed all major investment destinations in term of return from Investment
Now, let’s see, how by investing in common stocks a common man has made so much wealth.
Let’s take help of Guru Google and type name of some well known companies listed on Stock Exchange
HDFC Bank: If you had invested Rs.1000 in Year 2002 in HDFC Bank it would have become Rs.52380 in 2019
HUL: If you had invested Rs.1000 in Year 2002 in HUL it would have become Rs.9500 in 2019
MRF Tyres: If you had invested Rs.1000 in Year 2002 in MRF Tyres it would have became Rs.57000 in 2019
The List of Common Stocks with Great returns is so long.
If you can get so much return from Stock Market, why everybody is not investing
Lack of Knowledge
In Schools and Colleges, we get education and training to get degree so we can secure a good job, choose any profession or start any business. This helps us in earning handsome money but we do not get education on how to manage this money. Lack of knowledge about how to manage your finance it very critical issue.
Once we start earning, we look for different options to invest and find Stock Market as very lucrative one in terms of returns but we do not have proper knowledge about Stock Market Investing. Due to any bad past experience in our family or with any friend or relative we are advised to stay away from market.
Fear of Losing Money
When you deposit your money in FD with Bank, you may get lower returns but you know your money is safe but as Stock prices keep fluctuating due to Buyers and Sellers keep trading in stocks you find Stock Market riskier then Fixed Deposits.
The fear of losing your money stops you from investing in stocks
Successful Investing is about managing risk, not avoiding it ……. Benjamin Graham
When you invest in stock market, one thing should always be very clear that market is risky but you should know how to manage this risk for example by putting only that much money which you don’t need in near future, so you could invest for long term, by not putting all your money in one stock (benefits of diversification), by focusing on research about a company before buying its shares etc.
Perception – Stock Market is a Gambling
As we said due to past experience of people in our society, who have lost wealth in stock market they call it Gambling. Yes, Stock Market is Gambling if you speculate, buy stocks without any logic and just with assumption that it will go up because everybody is recommending it. But for Long Term Investors, who devote some time to research about a company before investing it is not Gambling at all
Stock Market is Voting Machine in Short Term and Weighing Machine in Long term
……. Benjamin Graham
Want quick returns
If you are looking for quick returns, want to double your money within a day or month or year then you may end up with losing all your hard earn money. Don’t expect Stock Market to make you rich overnight. Stock Market Investing needs discipline, study, patience and above all, long term perspective.
Buying a stock means you are buying a part of ownership in the Company
If you are waiting for further correction to start investing it is not a good idea. When you are just a beginner, there is no right time than today to start your stock market journey.
Step 1: Read Some Good Investment Books
Books have vital role in your journey to learn stock market investing. Books give you proper mind set and idea how successful investors are making money from stock market. After all Stock Market is not Cake walk otherwise everybody would have made money out of it. If you love reading then half the job of knowing how to make money from Stock Market is done. We have listed few very popular Investment books for your reference.
The Intelligent Investor
How to Avoid Loss and Earn Consistently
One Up on Wall Street
Learn to Earn by Peter Lynch
Rich Dad Poor Dad
Reading books may be boring for few people but when you are planning for a long innings in Stock Market, you should start with Investment Books. Books can teach you what nobody can. Within few pages (100 or 200) you go through the lifetime experience of writer, what he has learnt in his journey.
What do you need to Start Investing in Stock market?
Bank Account in any private or public bank
Demat and Trading Account
Cancelled Cheque or 6 months Bank Statement
Now let’s discuss where you should open your Demat and Trading Account
There are two types of Brokers
These are big brokers who provides different services apart from demat and trading account opening such as stock research, stock tips, sms alerts, telephonic support to place order.
Some of them are HDFC Securities, SBI Securities, Angel Broking, Sharekhan. They charge good brokerage on these complete services. But as a Beginners don’t need all these services.
Here comes the Discount Brokers in picture.
Discount Brokers are very popular now a days as they provide same technology to buy and sell stocks at zero brokerage or nominal brokerage which would be very less if compared with traditional brokers. Discount Brokers well suited to a beginner need who don’t want to waste his hard earned money on heavy brokerage. There are different discount brokers such as Zerodha, Upstox, 5paisa etc.
Now, Zerodha is No.1 Broker in India. We highly recommend to start your investing journey with Zerodha. They charge Zero Brokerage on Delivery.
It means if you buy share and take delivery in your Demat account you need not to pay any brokerage to Zerodha. Which is a very wonderful thing for a beginner.
If you trade intraday or in Future/Option you just need to pay Rs.20 per trade.
You can Click Here to Open your Account with Zerodha
Now when you have decided your Broker, Let’s move to the next step
How to select stocks?
You need to do some personal research and we will discuss some top source to start with
Best Apps for Stock Market
You need to download some apps so you could research about stocks, track movement in selected stocks and track different news in Stock Market
ET (Economic Times)
To know more how to use these Apps Click here
Best Stock Market Websites
To know more about how to use these sites click here
Also read: How to find your first Multibagger Stock
When you sort out few stocks from your research. Now get ready to make your first Stock Portfolio. There is no written rule how many stocks you should have in your portfolio but ideally you should have more than 3 Stocks but maximum 25.
Above 25 Stocks you would not be able to devote proper time in tracking.
Also read: How to make a good Stock Portfolio
We have covered all major steps, you should follow in your Stock Market Journey. Don’t wait for the right time. Start with small amount so you could first learn then earn.
Everything is online, data is available online. You just need to devote some time to learn and study Stock Market. Hope you have made your mind now about how you would start investing in Stock Market.
If you still have any query, please comment below.
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