Hello there! In this article I will tell you guys How To Invest In Indian Stock Market. It is really easy to invest in the Indian Stock Market. There are a few steps one needs to fulfil before actually investing in the Indian stock markets, which are similar to every stock market.
Let us begin with discussing the few basic pointers for our beginners.
- Bull – Optimistic phase of any market.
- Bear – Pessimistic phase of any market.
- Portfolio – Total number of securities owned by an investor.
- CMP – Current Market Price, the value at which the share is being traded in the market.
- Bid – Highest price any buyer is willing to pay for a share.
- Offer – Price any seller is willing to sell his/her share at.
- Agent – The brokerage firm which will trade your securities for you.
- Dividend – The distribution of profits by the company to its shareholders. (Not mandatory to pay dividend)
- Volatile – Volatility of any stock refers to its tendency to fluctuate. More volatility means more ups and downs, and less volatility means a more stable stock.
- Equity – The owner’s fund. Shares of a company represent ownership and are thus equity shares.
- Leverage – Borrowed fund. Debt instruments like debentures are borrowed funds.
- IPO – Initial Public Offering. The first time any company issues its shares to the general public. Issued in the primary market.
- Primary Market – Market where securities are formed and traded for the first time. As I mentioned – IPOs are done here.
- Secondary Market – Market where securities are traded after being issued in the primary market. Sort of like a second-hand market.
- Volume – Volume is the fluctuations in the price of the equity shares. High volatile shares face more fluctuations during trading.
These are some of the basic terminologies of the stock market.
Let us get on with the basics required to start investing in India.
1. TRADING ACCOUNT/ DEMAT ACCOUNT
Demat is short for dematerialized. This account holds all your securities in their electronic form. Any investor first needs to create a demat account in order to start trading in any stock market on the planet. The process of making a demat account in India is super easy. You can create one online with any bank or brokerage.
There are a number of apps too like Zerodha and Upstox and so on. You can easily create a demat account on any of these apps and your first step towards investment is done.
2. ANALYZING YOUR ASPECTS
This step is particularly important before actually investing money in your portfolio. Also, this step will help you in making a better portfolio. An investor needs to analyse various aspects in order to carry on with investing. These aspects change from individual to individual.
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Financial requirements; time period regarding long-term or short-term; main source of income, i.e. is stock market your only source of income or is it just an additional source; do you have any experience in trading or investing; what market are you investing in; and so on.
These are but a few aspects out of many that one needs to consider before investing.
3. MAKING A PORTFOLIO
Once you have evaluated and analysed your aspects and requirements, start building your portfolio. There is an ocean of shares in the stock market, but you will only pick those shares which match your analysed aspects and requirements.
Once you have narrowed the shares down, you will apply additional methods like diversification and correlation.
(In order to know all these technical jargon and methods I will suggest that you take up courses)
Diversification refers to picking stocks from various sectors, businesses, and even separate markets. This is the most basic way to avoid excessive risk and loss.
Correlation is any investor’s good friend. Pick those stocks which are negatively correlated with each other, i.e. if one stock falls, the other one rises. So, if your portfolio has 10 stocks, first 5 should be negatively correlated with the next 5. This reduces the overall impact of risk on your portfolio.
There are many other methods like this which can help you in making a strong portfolio. In the end, you should have around 10-15 stocks in your portfolio and the portfolio is custom made for your benefit, so stick to it.
4. START INVESTING
One important thing before you actually start investing is to observe the movements of your portfolio and the condition of the market. Once you are sure that the market is looking good and your portfolio is ready, its go time. Start investing your money systematically.
To avoid excessive risk I will suggest that you start an SIP, i.e. Systematic Investment Planning. In an SIP, you invest a certain amount of money every month (Out of your salary or income). This way you keep the average costing steady and become more attentive towards the market.
Another way you can invest is in a lump-sum, wherein you invest all your money at one time. (I really prefer the SIP)
Keep on observing the movements of stock market on a daily basis. You cannot invest and forget as stock market is a highly unpredictable place. One need to be updated with the events going around in the world. You may have to change the stocks in your portfolio in order to avert losses and unnecessary risk. Also, this will sharpen your observation skills and you might start catching the patterns of your stocks.
Along with observation, another important thing is to be patient. If you have carefully planned out your portfolio, then you will get your return, only if you are patient enough. (Patience is a virtue)
These were some basic points for How To Invest In Indian Stock Market. In order to improve your chances of succeeding in the stock market, I really suggest some excellent stock market courses. There are many stock market courses available in the market, but I will highly recommend The Thought Tree as they provide a mix of theoretical and practical knowledge.
Thank you for reading my article. I really love and appreciate it.