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6 Tips on How to Invest in stock market beginners

Whether it may be Warren Buffet or Rakesh Jhunjhunwala, investing in the stock market has created many millionaires. Rs 100 invested in MRF in 1990 would have turned to Rs. 30000 today.  If you are a new investor and wondering how to invest in stock market beginners, then you must read the below article thoroughly. The takeaways at the end of each point have to be adopted for building a fruitful corpus.

There are two stock exchanges in India, namely NSE(National Stock Exchange) and BSE(Bombay Stock Exchange). All the stock of companies in India is listed in NSE or BSE or both.

SEBI (Securities and Exchange Board of India) is a regulatory board formed by the Finance Ministry of India. Their aim is to regulate the trading in the share market and monitor the stocks listed in NSE or BSE.

 

how to invest in stock market beginners

 

Demat account: How to invest in stock market beginners guide

A Demat account is the first step in entering the share market. A demat account holds the shares in electronic format. There are various discount brokers available which will help you to open a free Demat account.

All you have to ready is with your KYC documents which include a PAN Card, Aadhar Card linked to your mobile number, and a cancelled cheque with the name printed on it of your savings bank account. The entire process of opening a Demat account and a trading account can be done from the comfort of your home. This is a worry-free process as these discount brokers are regulated by SEBI (Securities and Exchange Board of India).

Visit the link to deep dive into the entire process of opening a free Demat account with one of the discount brokers in India

How to invest in mutual fund directly?

Share market research: Investing in stock market  guide

The key to earning a good return on investment is to find a quality stock. You can have to analysis the past 1 year/3year/5 year trend on any stock. You will have to understand the amount of risk you are willing to take. The more the risk the higher the returns. A stock of a public sector firm has very little risk and gives a lesser return compared to a private sector stock. There are applications such as Money Control, Economic Times, etc. which can be used to do share market research and compare similar stock. Such applications help to stay updated on the latest news which will impact the share price.

Secondly, the takeaway on how to invest in stock market beginners is to keep yourself updated with the latest news and announcement.

Diversification: How to invest in stock market beginners strategy

It is always recommended to invest your money in more than one stock. This will help to minimize the probability of loss in investment.

For example, Ravi wants to invest Rs 200 in stock A and stock B. He invests Rs 100 in stock A and Rs 100 in stock B. So, the total investment amount in his portfolio is Rs 200. After a month, he finds that the value of stock A rose by 50% to Rs 150. On the other hand, the value of stock B dips by 50% to Rs 50. In this scenario, his total value of the portfolio is Rs 200, even if he has suffered a loss in stock B.

So, it is a good practice to invest your money across different stocks depending on the amount invested.

Thirdly, the takeaway on how to invest in stock market beginners is to choose stocks from different industries or sectors while creating a portfolio.

Penny Stock: How to invest in the share market for beginners

These are the stocks that always tend to attract new investors. These stocks have a market value of Rs 10 or less in NSE or BSE. Penny stocks are very illiquid in nature. This means that the volume of trade is very less for such stocks. As the volume is very less you cannot sell your share as and when you want.

Fourthly, the takeaway on how to invest in stock market beginners is by avoiding penny stocks.

Government policy: 

Government policies also play a very vital role in deciding the trend of a stock.

For example, if the government announces a reduction in home loans rates then the repercussions are felt in the home loan stocks for the next few months. The home loan sector shows an upward trend in such cases. Also, the cement sector will show an increase in share price after a reduction in home rates is declared by the government.

Another example is that the share price of pharma companies increased abruptly after India was hit by COVID-19. The government has instructed pharma companies to create a vaccine for COCID-19. The shares of pharma companies were the first to rise among all other sectors in India. They have doubled the investor’s wealth within a period of 6 months.

Fifthly, the takeaways on how to invest in stock market beginners would be to look for government announcements or updates.

SIP(Systematic Investment Plan): How to learn stock market

Always remember the moral of the story of Hare and the Tortoise. Investing a small amount of money every month for a long period of time will help to create a huge corpus. If a person is planning to invest in share for child education, marriage, buying a home, or retirement plan, then SIP in a portfolio is a very good option. The timeline for investing in a stock has to be at least for a period of 5 years. This will help to reap a fruitful harvest.

Here is a link to a SIP Calculator: Groww SIP Calculator

A SIP of Rs 1000 every month for 10 years compounded at 30% annually will help to create a corpus of Rs 7,52,684.

Lastly, the takeaway on how to invest in stock market beginners is to invest with a SIP plan.

Lastly, the takeaway on how to invest in stock market beginners is to invest with a SIP plan.

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ALL THE BEST

Debajit Kashyap

A contributing editor to Pure Knowledge Centum. He shares his knowledge to help beginners when it comes to Investment in the Stock market or Mutual funds. He is interested in writing on other topics also.

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