Investing in stocks is one of the most popular ways in which you can increase your wealth. From the chances of higher returns to the ability to beat inflation or to enabling passive income – the benefits of investing in stocks are many. These have led to the creation of multiple institutions providing share trading courses.
Although the trend in investing in stocks has always been there, there is only 2 to 3 percent of Indians who invest in the share market. The aversion on the part of the Indians has been responsible for keeping the Indian share market pretty slow.
There is still uncertainty due to a lack of understanding and information. In addition, investment in stocks requires a long-term commitment of your money. Many feel that forgoing consumption at present and increasing it for later might not be ideal. The risk-aversion mindset is also a deterrent in stock investment.
But the fact of the matter is, to increase your wealth for the future, investing in potential vehicles is necessary and if you are a beginner, investing in stocks is the best way to start. It is hopeful at the moment that interest awareness both are rising, leading to a greater number of investments and a booming market.
Here we have put together an informative guide to help you out as a beginner stock investor.
How to begin share market share market trading?
Before starting your investment in stocks, you need to figure out certain parameters. Without a clear goal in mind, the entire process of share market investment might seem complicated and risk-prone. There are many kinds of investment and not everything is for everyone. You need to find what types of investment works for you.
What is share market trading?
Even though the term share market trading is common, yet there is vague confusion surrounding it. This lack of clear understanding had kept the Indian stock market investment stagnant for a long time.
To put it simply, share market trading means buying and selling public shares of other companies and making money in the process. Shares are usually bought at a low price and sold when their value increases.
Here is a list of the things that you should know before investing.
Determine Your Risk Tolerance
Every investment product has certain risks. Some are high and some are low. When the product offers high returns over a short time, this automatically means that there are higher risks involved.
In addition, there are many kinds of products like large capitalization stocks, small capital stocks, value stocks, and stocks with aggressive growth. All these investment vehicles offer a certain.
Hence you need to determine risk tolerance, that is to say, how much risk you can afford.
Decide on Your Investment Goals
Defining a clear goal is the first and foremost when it comes to investment. You will be asked about your investment goal and risk tolerance while opening online brokerage accounts.
Typically these questions are supposed to create an outline of what exactly you want to accomplish from investing in the share market.
For example, if you are just getting started in the share market, your target would be to increase your money and investment becomes your passive income. If you are older, your goal might be protecting your wealth.
Your goals might also be building a house, saving for education, or buying other assets.
Finally, remember to update your goals according to the change in market behavior and trends.
Determine Your Investing Style
One of the most important points in investing in products is having a specific style. There are two ways of creating it.
- Doing your research, taking share market classes, actively following the market trends and behavior and actively managing your own account.
- The second style is more commonly followed by a number of people. They invest in products that everyone else is investing in and then they forget about it.
You can try following the tips below to set your own investing style:
If you have insight and confidence in your goals, value, and knowledge of stock investment, you can definitely manage your investment portfolio. Renowned online brokers permit you to invest in stocks, and bonds. ETFs, indexes, and so on.
When you decide to invest in stock market trading, consider avoiding individual stocks. Here, the entire investment relies on the fate of one single company. If they suffer loss, so will you.
One of the best ways to eliminate risk in investing in share trading is diversification. This strategy involves you making multiple investments in different vehicles to deal with share market volatility.
Choose Your Investment Account
There are two ways to create an investment account.
- Using Company’s Retirement account :
You can set up your own retirement account and use a percentage of it to invest in the share market. You can also invest in your employer’s company’s stock.
- Open a new Taxable Account
You can open a new regular taxable account for brokerage and trading from this account.
- A Robo- account
This type of account uses your investment goals and applies high-end algorithms to set your investment profile.
Manage Risk with Diversification
Diversification is one of the most commonly applied strategies to avoid the risk of losing it all. Instead of investing in single stocks, it is wiser to spread your investment across separate financial products. This reduces the risk of facing a big loss.
H2: Minimums to Open an Account
Most investment firms do require a minimum amount to deposit to activate your investment account. But, to fuel interest among the beginners many avoid asking for a minimum deposit. Firms requiring the deposit may offer discounts on account management and trading fees.
The Expenses You Need to Know to Invest in Stocks
There are many kinds of charges apart from the money invested.
Commissions and charges
Investing in the share market is not free. There are many other professions that completely rely on the new investor joining the share market.
Brokers usually charge a fee each time you trade shares, irrespective of buying or selling. The charges can increase, depending on how frequently you trade shares.
Mutual Fund Loads
New investors in share trading often prefer Mutual funds rather than paying high-rate commissions for individual stocks.
Mutual funds are nothing but pools of liquid finance collected by a trust from multiple investors who share the same investment objective.
There are various fees associated with mutual funds. These are:
- Entry load
Entry road fees are imposed on first-time investors.
- Exit load
When investors leave the mutual fund scheme within a specific timeframe from the date of buying the scheme, an exit load is levied upon them.
- Transaction charges
This charge is applied only once during the trading.
Expense Ratio
This is an annual charge taken by the asset management company which they express as a percentage of their daily net assets.
Online Brokers
Sharemarket trading is strongly connected with online brokers. Despite the availability of several online brokers, choosing the right one can be difficult, especially for a beginner. There are two types of broker services available in the share trading market.
Full-Service Brokers
Full-service brokers provide you the thorough financial services regarding investment. From giving financial advice to doing market research to portfolio analysis – everything is set by the full-service brokers.
They help you to create a better wealth plan and provide suggestions on how to achieve it. It is also important to remember that full-service brokers increase their fees as you start making a profit.
Discount Brokers
Discount brokers fundamentally provide buy and sell orders for their clients. They do not provide any financial advice on share trading regarding the investment.
Robo-Advisors
If your goal is building assets in the long term, Robo Advisors might just be the solution you are looking for. Robo-advisors are this automated system in which machine learning and artificial intelligence are used to advise on investment and portfolio management.
Having benefits like low cost, zero requirements of human intervention, and easy accessibility have made robo-advisories quite popular in India.
Share Market Simulators
Since technology is prevailing in all sectors, the investment sector is no exception. With modern advanced tools, you can have first-hand experience in stock investment without losing any real money.
Before the advent of simulators the only way to learn share market trends and tricks was to invest money in real time. This led many to lose money and interest in the share market.
Now with the prominent presence of simulators, you can experiment with share market trading. By using a share market simulator you can use virtual to invest and learn the process of investing and can see consequences without suffering any financial loss.
FAQ
What is share trading?
Share market trading is about buying and selling publicly available shares to make a financial profit.
Are stock trading courses worth it?
Stock market trading is a rapidly growing business in India. In upcoming years this percentage of investors is supposed to be higher too.
Learning and gaining knowledge on the share market by doing stock trading courses is really worth it.
How to learn share trading online?
You can take a stock market trading course online to gain knowledge about the market. You can also use virtual simulators and use virtual money to get experience.
The Bottom Line
India is one of the most important countries in financial growth. With nearly two billion citizens, increasing digital efficiency, and easy-to-access learning platforms, stock trading stands to gain both trust and steady popularity. It is not a stretch to say, India has a bright financial future in which stock trading plays a crucial role.