How to Invest in the Share Market is a big challenge after you have made up your mind to invest in stock. Picking up the right stock and Investing in that to compound your wealth in the Share Market, is very important, hence learn first how to invest in the Share Market and, WHAT IS SHARE MARKET.
If the right investment pick can compound your wealth in the multifold, a wrong Investment or company can lead you to a huge loss and capital waste. Hence, when you decide to invest in Share Market, you must know, how to invest in stocks, and what are the precautions and measurements that you have to take before investing in any stock or share in Share Market.
Why invest in the Share Market.?
Over the period, it is proven that the Share Market is the sole investment, that has made people billionaires. Share Market has generated such a huge return on investment, that no other investments like gold, Bond, and FD could ever compete. Share Market has many examples, where people have become Millionaires and Billionaires through stock investment.
The biggest investor of all time was Warren Buffet, who has started investing in the Share Market at the age of 13. He started his investment journey with a small amount of money. Today, he is considered one of the most successful in the world and has a net worth of over $100.9 billion dollars, making him the world’s tenth-wealthiest person. Almost all of his wealth is created by his investment wisdom and knowledge.
Similarly, India’s Big Bull Rakesh Jhunjhunwala has tripled his wealth within a span of three months. His first big win was Tata Coffee, where, he made a profit of five lacks in 1986. He bought 5000 shares of Tata Coffee at the price of 43 and held that stock just for 3 months. The stock zoomed to 143 which tripled his wealth.
How Can I invest in the Share Market.?
Before starting your investment in Stock Market, you have to have a Demat Account. A Demat account is an account that you open to start your investment in the Share Market. Your shares are kept there. You can open a Demat account with multiple brokers, like Zerodha, Upstox, Angel Broking, and Groww.
In order to open a Demat account, you need the following documents. (For India)
Source of income.
Be an Investor and not a trader.
As Warren Buffet says “Investing is simple, but it is not easy“. In Share Market try to be an Investor and not a trader. All wealthy people from Share Market are investors like Warren Buffet, Peter Lynch, Rakesh Jhujhunwala, Vijay Kedia, etc. They all have minted money from a value investment.
If you almost never want to bear the loss in the Share Market, be an Investor.
Buy a good stock and hold it for a long time. It is said, “In Share Market, money goes from impatient to the patient“, that’s why it is always recommended to buy a stock and hold it for years, because, the share market is very volatile and it keeps fluctuating. In short term, you will bear a loss, because in most cases the stock goes down as soon as you buy it.
Especially, beginners should always start with investing and not trading. It is a plus point if you read a bit about What is a Share Market beforehand, so would have some idea about it.
Which Stocks should you invest in as a Beginner.?
Once you have opened a Demat Account, start researching about good stock. As a beginner, invest only in Blue Chip Stocks.
Blue Chip stocks are the companies with large market capitalization and are the market leaders in their segments, such as Amazon, Apple, Google, Berkshire Hathaway, Reliance, TCS, Hindustan Uniliver, and HDFC Bank.
The benefits of investing in these stocks are countless and risk is very limited. These companies are stable and have been generating a handsome return for their investors for decades. Such stocks are the market leader in their field and have a strong mote. Being a market leader their sales and revenue keep growing and they are able to generate good returns for their investors.
During market fluctuation, these stocks fall to a limited range and are capable of bouncing back to their real value. Thus, if the stock market is crashed, you have less fear of losing money, as they can recover their real value very soon.
Diversify your Portfolio.
If you want to be successful in the Share Market and lower your risk of losing money, then never invest your all capital in one stock. Always diversify your portfolio and buy multiple stocks. This helps you balance your portfolio while market and stock fluctuation.
If one stock falls, the other one goes up. This way, your portfolio Additionally, choose shares from different industries, like FMCG, Pharma, IT, Automobiles, NBFC, Chemicals, Banking, etc.
In the Share Market, most of the time stock performs industry-wise. If, for example, the IT sector is performing very well and going high, possibly, the banking sector or Pharma for that matter will be down that day.
Selecting stocks from different industries will balance the rise and fall of the market. If, one or two sectors are down, the other two would be going up.
Follow a strict Stop Loss.
As a beginner, always set your risk appetite and follow a strict stop loss in the share market.
Stop Loss is a systematic option that you set with your broker. Basically, you are telling your broker to sell your stock, if that particular share goes down from your risk appetite.
For example, you have bought 100 shares of Tata Motors at 302 and you do not want to take much risk if Tata Motors falls. Therefore, you only can bear a 12 rupees loss per share and not more than that. Thus you set a stop loss as 290. That means telling your broker that if Tata Motors, unfortunately, falls and goes down to 289 or 270, sell my stocks. If your stock slips and stop-loss, which is 290, is hit, your Tata Motors 100 stocks will be sold automatically at your set price.
Stop loss helps you always to take a very calculated risk and it bounds your capital loss to a limited extent.
As the famous investor Warren Buffet says “Always follow two rules in Share Market. Rule No.#1 Never Lose your capital.
Rule No.#2 Never forget rule number 1
Invest in SIP.
As a beginner, never invest in one go. Always invest in a systematic way and in SIP, so that, if your stock falls, you can aggregate. This way your buying price would be somewhere in between and your stock would reach your buying price soon. Also, if it goes up, you can add more shares to your portfolio.
Start with a small amount and try to learn as much as you can. Once you are confident and able to understand, how the Share Market works, you can increase your investment.
Keep that in mind, that you are not going to be as rich as Warren Buffet, or Vijay Kedia in one day or one year. It had taken them years to mint such huge money, so would it take in your case as well. You have to be patient.
Also, never compare your one-year experience with their 30-40 years of experience in the Share Market, hence get ready for gradual progress.
Do not be emotional and greedy.
It is observed that many traders bear losses because they become emotional in the Share Market. Thus, it is important to learn, How to Invest in the Share Market.
Sometimes, due to their greed, they bear huge huge losses. People wait when stock is going up and do not book their set profit. Ultimately, stock falls and they lose the profit.
Always set a profit goal if you are a short-term trader and take an exit if your goal is met. DO not be greedy and emotional, else, it would turn into a bad business.