Did you search about how to invest in stock market for beginners on Youtube, Google and where not? Don’t worry this blog is for you. If you are searching about how to invest in stock market for beginners everywhere, then this is a beginner-friendly guide for investing in the stock market.
First steps first, you will need an online Demat and trading account, with an agent, that will be linked to your bank account. The process of opening a Demat account is very easy and once you have it, you can begin your journey of investing in the Indian stock market.
Let’s begin by familiarising you with the essentials- the stock exchanges and their purposes.
Table of Contents
Introduction-
The purchasing and selling of stocks happen in the stock exchange which is closely monitored and regulated by the SEBI (Securities and Exchange Board of India). The 2 Indian stock exchanges that are most significant are the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
To begin, in adherence to your personal objectives, pick the financial assets that you would prefer to invest in. You can be sure that the Indian stock market offers exhaustive options to choose from. In case you are worried about your income from investments and the protection of capital, you can opt to choose from debt instruments. For instance, bonds. But, on the other hand, if you have a reasonable risk appetite and are keen on seeing your capital appreciate, equity should be your choice.
Note to yourself- before you put resources into a share, ensure that you have thoroughly investigated the organization, its financials, future possibilities of development, and so forth.
Accomplish your objectives by:
- Begin by defining your short term targets and ultimate objectives.
- Spend time learning about financial instruments and financial assets.
- Select the assets that are relevant to your requirements.
- Make regular investments
I hope this gives you a fair idea about how to invest in stock market for beginners and now let’s move on to the various financial instruments.
Even now wondering how to Invest in Stock Market for beginners? Then, Understand Stocks in Share Market-
When you purchase a share, you can become a “common shareholder” or a “preferred shareholder” based on your proprietorship.
If you secure the status of a common shareholder, you are allowed to cast a vote in investor gatherings and qualified to get a share of the company’s profits. In the event that the organization where you have made contributions fails, you are entitled to get the portion of liquidation only once all preferred investors and creditors have been paid off.
If you are deemed as a preferred shareholder, then you may be denied voting rights but will have your hands on the company’s profits prior to the common shareholders.
You must remember that market capitalization is equal to the share price multiplied by the number of stocks. On the basis of market capitalisation, you may choose to invest your resources in mid-cap, small-cap and large-cap.
Large-cap stocks:
Large-cap stocks are offered by firms that have a reputation and have a foothold in the market. Some examples can be ICICI bank, Microsoft, Apple, and Amazon. Making investments in large-cap stocks are safer when compared to investing in the other categories.
Mid-cap stocks:
Mid-cap stocks are shelled out by companies who have the ability to expand their business and are comparatively riskier than large-cap stocks. Polycab India, Gujarat Gas, Crompton Greaves Consumer Electricals can be some examples of this segment.
Small-cap stocks:
Small-cap stocks comprise startups and pose the highest risk in terms of receiving a return on investment (ROI). However, on the other hand, they can become a success overnight. Religare, Deepak Nitrite and Laurus Labs can be a couple of examples here.
An essential next that you must acquaint yourself with would be an Initial Public Offer (better known as IPO). IPO is a way for companies to garner funds from the public. How does it happen? Companies offer their shares in the share markets to usher in capital for their future endeavours. You must remember that the returns on your investment will be high when a share’s compounding power is high. To put it simply, the longer you hold a share, the more returns you will potentially earn.
Financial Instruments in Stock Market
Shares/ Equity:
If you invest in equities or stocks or shares, you are automatically entitled to a part of the company you invest in i.e. you are given part ownership of the company. Stock brokers like Angel Broking, ShareKhan, Zerodha, India Infoline can aid you to buy and sell stocks.
Mutual funds:
In the case of mutual funds, the resources of various unitholders are combined to in turn, invest in a variety of financial instruments. The revenue that is earned on the investments is then allocated to the unit holders according to the number of units possessed by each of them.
Bonds:
Bonds, also known as debt instruments, are a means through which an enterprise or government borrows from financiers, at a predetermined interest rate, for a specific period of time. They are less risky when compared to shares and yield fixed incomes.
Conclusion-
Stock Market is a broad concept. Updating ourselves with latest knowledge is important. By reading this blog you took your first step towards updating yourself. Read our other blogs to gain in-depth knowledge about stock market.
We hope that we must have answered your question of how to invest in stock market for beginners through this blog.
