Right Way Of Investing In Share Market

In our previous post, we discussed what is stock and what is stock marketing. So, if you are new in the stock marketing field, then this is the second step – How to invest in the share market? You can very easily invest in the share market by understanding the details of stock marketing.

Right Way Of Investing In Share Market

Right Way Of Investing In Share Market

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we will not say that you should put all your earnings into stock marketing, but, you can earn profit by investing a small part of your earnings in the market, all you need is to share marketing information and awareness so that you can earn extra income for yourself and your family and fulfill your dream.

How To Invest In Share Market.

For investing in the Indian share market or share market, there are some prerequisites that we would like to mention earlier. You have to complete these necessary procedures to invest in the share market.

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  1. Bank Savings Account.
  2. Trading and Demat account.
  3. Computer / Laptop / Mobile /Computer/laptop/mobile.
  4. Internet connection.

The Following Documents Are Required To Open a Demat and Trading Account

  1. PAN Card.
  2. Aadhar card (for address proof).
  3. Canceled Cheque / Bank Statement / Passbook / Canceled Cheque / Bank Statement / Passbook.
  4. Passport size photos.
  5. Your savings account can be in any private/public Indian bank.

Through that bank, you can open your trading and Demat account.

Where to open my trading and Demat account? This will be discussed later in this post on ‘Choose Your Stock Broker‘ (STEP 4).

When you are new to the share market, you enter with a lot of dreams and expectations. You must be planning to invest your savings and make millions in return.

While there are hundreds of examples who have made huge wealth from the share market, there are thousands who have not.

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How to invest in the share market?

demat
Trading VS Savings VS Demat Account


Step 1: Select your investment goals


It is important to start with choosing your investment goals. Start with end goals in mind. Know what you need.

Do you want to increase the money saved to get higher returns? Do you want to earn a passive income from your investments through dividends? Are you investing for a specific goal? Or are you just looking to invest for fun?

If you just want to learn how to invest for fun, that’s fine. But make sure you don’t overinvest or get too attracted by the market, moreover, most people start the same way and choose their goals later.

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Anyway, if you are starting out with goal-based investing, remember that the time frame will be different for different investment goals. Your goal can be anything like buying a new house, a new car, money for your higher education, the marriage of children, retirement, etc. However, if you are investing for your retirement, you have a longer time frame than investing to buy a home.

When you know your goals, you can decide how much you want and how long you need to invest.

Step 2: Create a Plan/Strategy


Now that you know your goals, you need to build your strategy. You may need to find out whether you want to invest in a lump sum (large amount at a time) or SIP (systematic investment plan) approach. If you are planning to invest in the short term, analyze how much you want to invest monthly.

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There is a misconception in our society that you need to save big to get started. Or say, one lakh or more. But it is not true. You put a small part of your earnings like 10-20% for investment.

stocks-and-shares
creating plan and strategy

Step 3: Read some investment books


There are many decent books on share market investing, which you can read to know the basics. Some good books should be read by those who are new to investing.

Step 4: Choose your stockbroker


Deciding on an online broker is one of the biggest steps you need to take. There are two types of stockbrokers in India:

Full-Service Brokers
Discount Brokers
Full-Service Brokers (Traditional Brokers)

They are traditional brokers that provide trading, research, and advisory facilities for stocks, commodities, and currencies. These brokers charge a commission on every trade executed by their clients. They also offer investment facilities in Forex, Mutual Funds, IPOs, FDs, Bonds, and Insurance.

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Some examples of full-service brokers are ICICIDirect, Kotak Security, HDFC Security, Sharekhan, Motilal Oswal, etc.

Discount Broker (Budget Broker)

Discount brokers provide trading facilities to their clients. They do not offer advisory and are therefore suitable for the type of clients who wish to trade do-it-yourself/ or do-it-yourself trading. They provide low brokerage, high speed, and a good platform for trading in stocks, commodities, and currency derivatives.

Some examples of discount brokers are Zerodha, ProStocks, RKSV, Trade Smart Online, SAS Online, etc.

Nowadays, you can open your Demat and Trading account / Trading and Demat account and do trading in all types of private and government banks.

Right Way Of Investing In Share Market
Capital Market VS Money Market

Step 5: Start researching and investing in common stocks


Start noticing the companies around you. If you like the product or services of any company, do in-depth research to find out more about its parent company like whether this stock is listed on the exchange or not, its current share price What is it, etc.

Most of the products or services that you use in day-to-day life – soap, shampoo, cigarettes, banks, petrol pumps, SIM cards, or even your innerwear, have a company behind them all. Start researching about them.

For example – If you are using ICICI Debit/Credit Card for a long time and are satisfied with the experience, then check about ICICI Bank. Information about all listed companies in India is publicly available on Google. You can find out its share price and much important information etc. by simply entering ICICI share price by going to Google.

Similarly, if your neighbor has recently bought a new Baleno car, you can try to find out more about the parent company, i.e. Maruti Suzuki, what other products it offers,s and what other products the company has launched recently. How it has performed – like its sales, profit, etc.

You start with the popular large-cap companies. And once you are comfortable with the market, invest in mid and small caps.

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Step 6: Select a platform to track your performance


You can simply use an Excel or Google spreadsheet to track your stocks. Create a spreadsheet containing three tables:

  • The stocks you are interested in and need to study/investigate,
  • Stocks you’ve already studied and found decent
  • Miscellaneous Stocks – for other stocks you want to track

In this way, you can easily keep an eye on the stocks. In addition, there are many financial websites and mobile apps that you can use to keep track of stocks. However, I find it easiest to use Google Sheets to keep track of my stocks.

Step 7: Exit Plan


It is always good to have an exit plan. There are two ways to exit a share. Either by booking profit or deducting loss. Let us discuss both of these scenarios.

Basically, there are only four scenarios when you should sell a good share in your portfolio-

  1. When you badly need money
  2. When Stock Fundamentals Have Changed
  3. When you get a better investment opportunity and
  4. When you have reached your investment goal

If your investment goals are met, you can happily sell the shares and exit. Or at least, book a portion of the profits from your stock portfolio and transfer it to other safe investment options. On the other hand, exit the stock even if the stock has fallen below your risk level. In short, always know your exit options before entering.

That’s all. There were seven steps that will help you learn how to invest in the share market. Friends, in the above discussion, there are many important points that every share market beginner should know.

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summary

We have learned how to invest in the share market. We hope that this post of ours will help you in investing in the share market. And we pray that you earn huge dividends.

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