Investing in the stock market is easier than newcomers might think. Initially, all you need is the basic knowledge of stocks that should be increased gradually. Learn and follow some basic rules of investing in order to find the right stocks and an online demat and trading account to get started. Investing in stocks is beneficial for long-term investors as the investment will be less affected by market volatility and you will be able to manage the risk. As a beginner, if you want to start small, you can do it. With your demat account, you can buy even a single share. There is a lot to learn about the stock market. Let us start with the basics of the stock market.
Stocks are equities that represent ownership of the investor in a Company. The investor becomes a part-owner of a proportion of the company’s assets and profits with the purchase of its shares. Companies issue stock to raise money.
●Blue-chip stocks – Shares of companies with solid foundations and high market capitalization.
● Growth stocks – Stocks that grow at a higher rate than the rate at which the market is growing.
● Speculative stocks – These are the stocks traded at a low price without actual fundamental logic and carry high risk. These stocks rise and fall a lot even in a single trading session and their prices can be manipulated easily. Best to avoid speculative stocks when you are in the learning process of investing.
Earning from stocks
● An investor can invest in common stock or preferred stock.
● The preferred stockholders are entitled to earn a predetermined dividend payment.
● Common stock offers a portion of the company’s profits and losses.
● You can book profits by selling your stocks when their price goes up.
● Or you can earn dividend payments with a long-term investment.
Demat account is the prerequisite to start investing and required to hold your stocks electronically so that you can trade them at various stock exchanges. Dematerialization is mandatory as per the market regulator SEBI to make trades. You can open a demat account and trading account together online with a registered depository participant and stockbroker free of cost. However, there are other ,,Demat,, account charges that are applicable like annual maintenance cost, transaction cost etc. These costs are nominal.
Demat accounts have made stock trading convenient than ever. The safety offered to your financial securities is one of the best demat account benefits.
How to Make Investments
Investing requires a better understanding of how the stock market works, what type of investor you are, investment goals, and to manage risk. Let us discuss these aspects one by one.
To start investing, you need to be clear about the following aspects:
1. What Kind of Investor You Are
Before investing, find out answers to – what kind of investor you are, what financial goals you want to achieve, how much risk you can take. Answers to these questions will help you in investing and to find the right stockbroker as well from full-service or discount brokers if you are looking for a helping hand.
2. Investing Budget
You may ask how much money is required to start investing in the stock market. It simply depends on which type of stocks you have chosen to invest in. However, demat and trading account allows you to buy or sell even one share. Experts suggest beginners start investing through mutual funds and exchange-traded funds (ETF).
3. Focus on the long-term
Successful investing works with different approaches. The best bet by experts is to stick with stock market basics. Choose a company with strong fundamentals with potential for long-term growth and invest in its stocks with the perspective of long term profits.
4. Manage your stock portfolio
You should keep a check on your stock investments to identify their growth rate. You should reconsider your investment portfolio at least two to three times a year to ensure that you are still in sync with your investment objectives.
These are a few steps and basics that will help you to start investing. Stick to basic rules of stock marketing. Soon you will be able to identify the best stocks and the best time to buy/sell stocks in order to maximize your profits. If you seek assistance from a stockbroker, you can find one easily. Make sure you have clearly defined your financial objectives. Check on demat account charges while opening brokerage accounts.