Stock Market Investing Beginners: For beginner stock market is not easy as they think. they gets scared by just hearing stock markets name. Definitely there are risk in market, as there is profit there is loss also. there are many such stocks where if you had invested Rs 1,00,000 it would be 10,000 now. So this market bring you big profits and loss also. but so you make little loss and gain more profit. We are here for that you know right with step by step guide.
Difference between Trading and Investing
Investing is when you buy a stock of company or you buy portfolio of stock, and take its custody or ownership.it is called delivery in technical term. Investing and Trading is different things trader are the people who buy a stock and within the same day sell that stock.
Because they are riding on the price movement. Buy a stock Rs. 100 and when he went up to 102 sold it. But you may ask, ‘why for two rupee’? No, Its not for just 2 rupee its for 2% if a person earn 2% every day then by the end of the year he would have increased his money by 76 times. of course, it is not possible, and no one can do this initially.
But to give a sense this greed drives a lot of traders, plus very technical ,very time consuming because you have the actively track the stock market. How the price move, when it is moving how much to buy and so on. Highly highly research driven. You will have to make models it doesn’t work on emotions. and this is not easy for new investor, so if you are a new investor or a scared investor who wants to step into the stock market then investing from the delivery perspective is the right approach.
What are the prerequisites necessary to investing in Stock Market?
Thankfully , there are not a lot. Two documents which are critical, you must have a pan card and that is necessary. Second you must have a Demat account PAN card in necessary because every this you buy or sell in Stock Market is taxed and that has to be something which is attributed to you tax identity and Demat , because it is bank account equivalent where your stock will be safe.
How much should you invest?
Financial Aim : You should know that why are you investing. Are you saving for a short term goal or a long term wealth creation.
Risk to Reward Ratio : Understand how much you can accept losses or risk tolerance with market volatility. Always take a risk less than your reward.
Current financial situation : you should have to know What is your income, expenses, debts, and saving rate.
Brokerages : Be aware of the brokerages and fees with your investment broker.
Focus on your knowledge always educate yourself with upgraded knowledge and make informed decision.
Recommended Investment Amount for beginner
- Start small begin with an amount you are comfortable with ,even it as low as 10000 rupee to 25000 rupee ($100 or $500)
- Invest a money of your income that you won’t need immidiate expenses.
- Diversify your investment in multiple assets with different sector of the market.
Where to invest
Here are 3 Risk profile
Low Risk, Medium Risk, High Risk what is the definition of that FD gives you 5 to 6 % returns, a low risk stock market investment should give you around 12 % over the long term, long term means 5 to 10 years minimum. Medium risk gives you 15% approximately. High risk give you around 18% now you will think 12,15,18 % is not much make a difference but it will actually make a difference.
If you put the formula in excel and ask that this one lakh rupee that I have, if I invest it than after 20 years how much will it be at 12%, 15 % and 18 %? Then there is another interesting formula IS rule of 72. 72/ Rate of return = year to double money then you know that how long it takes for your money double for eg 72/12% return then we get 6 means every 6 years your money will double so if you grow one lakh rupees for 20 years at 12 % then after first 6 year one lakh become two lakhs than after next 6 year two lakhs become 4 lakh and after next 6 year 4 become 8 lakhs so you will get around 8 lakh rupee. for 1 lakh investment at 1 lakh with 12 %.
If this was 15 % then according to 72 rule 72/15 is around 5 years not approx. but assume 5 so 1 lakh become 2 lakh after 5 years after next 5 year it will become 4 lakh and at the 20 year it will become 16 lakh means which is the same one lakh become 16 lakhs now at 15 % over 20 years from that 8 lakh rupee, same we apply for 18 % by rule of 72 our money will double after 4 years, then after same calculations our 1 lakh become 32 Lakhs at 18 % over 20 years so that is the fundamental difference of low, medium and high risk.
That means the people with low risk they will be investing in stock market in companies with an approach where the price is somewhat stable.it will moves through ups and downs because that is the fundamental characteristics of stock market. But that movement is not like that you get heart attack every time. But the high risk ones will always in scary position in a way that you will not comfortable with that.so low risk is the better option. if you are happy with 12% then the way to do this is to invest in top stocks of the Exchange.
So always invest in Blue chip stocks where you can earn money safely because you can easily trust on blue chip or top stocks according to penny stock. Blue chip company have the potential to grow their organization.
Conclusion
In above information we learn about Stock Market investment for beginner. A the difference between trading and investing. how investing is always safe for long term wealth creation. How much you can invest and where to invest. Hope that this content helpful for you. we are dedicated to providing valuable market insights for you benefit.
