If you’re wondering how to invest in the stock market and don’t know how to get started, here’s a quick guide to help you kick-start your investment journey.
What Are Stocks and How Do They Work?
Stocks are a fundamental part of any investor’s portfolio, whether they are purchased directly or indirectly through funds, and are one of the most basic financial assets an investor can purchase.
A stock represents a small piece of ownership in a public company and allows investors to reap financial gains from owning a part of that company. Once you master the art of investing in stocks, it’s a great way to grow your money.
In fact, stocks are even seen by many as the quickest way to get rich.They are an investment that means you own a share in the company that issued the stock. Stocks are a great way to invest in some of the most successful companies in the world. Companies sell shares in their business to raise money. They then use that money for various initiatives: A company might use money raised from a stock offering to fund new products or product lines, invest in growth, or even expand their operations.
When you buy the stock of a company, you’re effectively buying an ownership share in that company. The primary reason why people own stocks is to earn a return on their investment. That return generally comes in two possible ways:
- The stock’s price appreciates, which means it goes up. You can then sell the stock for a profit if you’d like.
- The stock pays dividends. Not all stocks pay dividends, but many do. Dividends are payments made to shareholders out of the company’s revenue, and they’re typically paid quarterly.
Basic Guidelines to Follow Before Investing in the Stock Market
If you wish to start investing in the stock market, it is instrumental to possess a fair understanding of stocks and shares. Regular investment along with avoidance of financial risk can help you save a significant amount of money over a period of time. Before you get into what are the best stocks to buy and how to make money from stocks etc, there is a fair bit of groundwork you are required to do.
Here are a few tips that you can start with:
- List Down Your Investment Goals
Before you decide to allocate your money to different stocks in the market, you must have clarity related to the investment goals that you want to achieve and in what time period. Listing your goals down sets a clear objective in terms of planning your investments and working towards them. Whether it’s saving for a new home, planning your retirement, planning your children’s future or building wealth, it’s always important to know what you’re saving for, before you start saving. Planning will help you make smarter investment choices and yield better results within your timeline.
2. Study the Stock Market
Prior to making an investment, a beginner in the stock market is advised to study the stock market for the basics including the various securities that compose the market. The fields that must be focussed on include order types, financial definitions and metrics, various kinds of investment accounts, timing of investment, methods of selecting stock, etc. Gaining a thorough understanding of the stock market will ensure that you’re in a good position to assess risks and make the right selection.
3. Do Your Research
Before you start investing, you need to get acquainted with the various Indian stocks in the market. There are many companies like Reliance, Tata Motors, HUL, Hero Motocorp, ITC, HDFC bank etc which you might have already heard since childhood. Start exploring the market and get an idea of different public companies listed on the Indian stock exchanges. It is important to collect information about the top stocks, take advice from experienced investors who can help you understand which stocks are good to invest in.
4. Stay Updated
There are many things related to the stock market like corporate announcements, government actions & policies, interest rates, repo rates etc. Moreover, the stock market is dynamic. That’s why, you need to keep yourself updated with what’s happening locally and globally.
Here are a few websites that you should bookmark in your laptop/phone browser and read the news daily.
Money Control - http://www.moneycontrol.com
ET Market - http://economictimes.indiatimes.com/markets
Bloomberg Quint - https://www.bloombergquint.com/markets/
5. Analyse Risks
The level of risk associated with the investment option you choose must be carefully analysed before you put your money into something. The best way to identify the risks associated with various products and identifying the best option is to conduct a comprehensive comparison between the different schemes. Doing so will enable you to figure out what level of risk each product holds and you can invest your money accordingly. Understanding the level of risk involved with investments will help you avoid those instruments that have the potential to see you incur losses. Do not rely totally on the financial reports to select a stock to invest in the Indian stock market. These reports show the past performance of the companies. However, future growth depends on various aspects of management, competitors, industry, etc. Always look at both the quantitative and qualitative aspects of the company before investing.
Investing is a proven strategy to build long-term wealth for a secured future through systematic planning and smart decisions. Now that you know the basics, you are ready to commence your investment journey. So go ahead, choose Wizely and make some smart investments!
