How to invest in stock market? This is the first question arises in the mind of a newbie investor. They have queries both for procedural aspects as well as suggestion aspects. When you are aspiring to earn big money in a legitimate way, the best option would undoubtedly be the stock market investment. Because there is no other alternative that can give you such a giant leap. So to cover up the topic how to invest in the stock market we have bifurcated the article into two parts: i) the procedural part and ii) the suggestion part i.e. tips for investing.
How to invest in stock market: The Procedure
If you have already completed the procedural requirements of how to invest in stock market, you may jump into the suggestive part of the article. But, if you want to know the requirements for doing stock trading you may read out from here. The procedural points here are explained in brief in the context of India Stock Market.
1. The first thing required is your PAN Card. Without PAN card you cannot do any trading. The card contains 10 digit alphanumeric number along with your name, your father’s name and date of birth, used for various financial transactions. If you need the PAN card you have to apply with either of the two authorities UTITSL or NSDL with your eligible identity proof and address proof.
2. Get a broker of your choice. There are hundreds of brokers in the market, pick up the right one that fulfills your requirements at affordable costs. Choose the appropriate service as per your needs and make an agreement with them. Also, see whether they are registered with SEBI and have a good track record.
3. Get a Demat and Trading Account. For doing stock trading you need two accounts. One is for holding your stocks and the other one is for trading your stocks. The first one is called Demat (Dematerialised) Account. Trading account is required for buying and selling of stocks. The trading account can either be offline or online. You can operate it yourself or through your broker.
4. Linking up your bank account. For doing stock trading you need a bank account linked up with your trading account.
Most of the stock brokers in India provide all the allied services related to stock trading from opening the Demat account to linking the bank account, everything. So, it’s important to choose a good broking house for the purpose. Some of them even provide stock trading tips as paid service.
How to invest in stock market: 7 Tips for investing
If you are a newbie in the stock market, it’s natural that things may prove out to be confusing and highly uncertain. In such circumstances, the chances of your failure are more certain than making money out of stock trading activities. The volatility of the stock market in recent years has taken a toll on the money of the investors. This is highly demoralising for the new investors who have just entered or are willing to enter the stock market sooner or later. So, they are in much need of the tips for investing.
At the same time, there are also a number of investors who are regularly gaining out of stock trading activities even in worst market situations. They follow some rules which are essential for winning in the stock market. Here are some of the tips for investing in the stock markets that are beneficial for earning good return out stock trading activities.
1. Be A Disciplined Investor
If you ask an expert how to invest in stock market? Definitely, his answer would be about the disciplined approach. Discipline is the prime quality an investor should have. You must have a plan and schedule to invest in stocks. A definitive plan about fund allotment, the timing of investment in right shares and held them patiently gives you outstanding results. Hopping from one share to another without any disciplined approach for higher gains will go in vain. A disciplined investor always tries to make a broad portfolio covering stocks from different sectors. This gives a good diversification to the portfolio resulting in minimum risk and maximum gain.
2. Keep A Close Watch on Investment
Stock markets are such that you cannot put your money and forget it. You cannot take your eyes off the stocks you invested. Because stock markets are ever fluctuating and affected by events around us. Hence it is important to review the investments from time to time and even modify portfolio as and when the situation demands. All you need to do is prepare a strategy for investing. It’s also important to have a reality check about the stocks you invested. Your expectations on your investments should not be unrealistic.
3. Never Invest With Borrowed Funds
One of the crucial tips for investing. Never try to take risk investments with borrowed funds. This may turn out to be a fatal. Stock markets are highly volatile- returns cannot be guaranteed from the investments. So, borrowing funds at a fixed interest expense or invest out of core funds for stock trading is nothing but a foolish choice and you will be in a debt trap. Try to invest in stocks only out of your surplus funds that don’t impact your livelihood.
4. Don’t Take Emotional Decisions
Trading decisions based on emotional feelings are very common in stock market investment. Normally these decisions are backed by rumours, greed and fear. Investment decisions based on rumours are the worst case scenarios and losses out of such situation are inevitable. In the same way greed at the time of bull market and fear at the time of bear market affects our investment decisions badly. Taking rational decisions while investing in stocks are vital for positive returns.
5. Understand Before You Invest
When you are investing in a particular stock, you are becoming the stakeholder of the company. Necessarily it’s important for you to understand the ins and outs of the company’s business affairs. Else you will be nowhere to take fruitful investment decisions. In the case of stock trading never carried away by a sensation. Because in the long run it won’t help you and you will end up losing your hard earned money.
6. Do Your Own Research
When you are in stock trading activities you can have investment advice from your brokers, expert opinions, offline and online media reports for getting better returns. Over and above you need to do your own research about the stock of the company you wanted to invest. For prosperous business decisions, you need to be informative about the stock, which can be done by studying their financial statements, dividend payouts, ratio analysis etc.
7. Don’t Go For Market Timing Strategy
Market timing is a strategy for buying and selling stocks by attempting to predict future market price movements. The prediction is based on an outlook of an aggregate market or economic conditions resulting from technical or fundamental analysis rather than an individual stock. This is a very speculative strategy and chances of gains are very inconsistent. Most of the experts or professional investors avoid such market timing strategy. Because they believe it is not always possible to time the market consistently over multiple stock cycles. Equity SIP is a good choice in a highly volatile market.
Though there is no sure shot formula for success in the stock market, yet the above tips on how to invest in stock market may guide you to understand the market behaviour more closely. These will definitely help you to plan a strategy to invest in stocks and gain you maximum out of it.