We often feel butterflies in our stomach when we hear something related investing in stock market’. Investing in Stockmarket is a buzzword these days and most people are stepping into their first SIP’s, ETF’s, or Other investment schemes. On one side the Stock Market looks highly rewarding, on the other side, it can lead to severe dilemmas. Let’s Understand “How To Investing In Stock Market.”
Are you wondering why we are saying that the Stock market is rewarding and discouraging at the same time? This post is going to revolve around this question only. Keep reading to start investing in stock market.
Before we move further with our current topic, if you are a newbie investor aspiring to gain more knowledge about the origination of Stock markets in India, check out our previous blog post – here
Economically speaking, the financial markets in India play an important role in nurturing a growing economy in the country. In 2020, the market capitalization of listed domestic companies in India aggregated more than 98 percent of the total GDP (Gross Domestic Product). See, a Stockmarket is a place full of opportunity. Though, you should be well prepared to reap the optimum benefits out of these opportunities.
How To Investing in Stock Market: A Rollercoaster Ride
Table of Contents
So, the significance of the stock market is growing rapidly in India. If you have made up your mind to start investing in the stock markets, you should be knowing about some important yet simplified things. Do you know why?
It is like – you are going to a strange place for the first time and you don’t know the right direction. You might get lost because of your ignorance! Similarly, if you enter the Stockmarkets, you should have some sort of map or knowledge about – what, how, and when to do things in the market.
To empower your financial knowledge, we have come up with Certain Do’s and Don’ts of investing in Stockmarket in India. Go through them and utilize your capital in the stock market in the best possible way.
Don’ts of How To investing in Stock market in India
As stated earlier, Stockmarket can be highly volatile in case you do not keep an eye on your behavior (both physical and mental). So to play safe, you should not indulge yourself in things that we are going to discuss in this part. One thing to remember is that your thoughts guide your action and your actions reap results. What does it mean by this sentence? We will know about it in our first point.
Don’t lose your cool while dealing with the market
Now, you might have seen this that people tend to go crazy at the time when the market goes down. It’s normal human behavior. Isn’t it? But, if you don’t want to lose money unnecessarily in the stock market, then you have to keep your emotions in control. Here, a question arises- how emotions can make us lose money in Stockmarket?
Let’s learn it with the help of an example – suppose that you have 100 shares of XYZ company and you are keeping an eye on their prices daily. You are checking the market straight at 9:15 AM (market opening time) to see whether your shares have gained some profit or not?
Someday, as we have stated earlier, the market significantly goes down due to its dynamic nature. You started panicking because the price of your 100 shares has come down. Here come your emotions in the picture. Your aggressive panicking guided you to sell your share because you have this thought in the back of your head that ‘the share price will go even lower than this, so you should sell your shares now so that you could get at least some of your money back.’ You did the same and sold your entire 100 shares of XYZ Ltd. But guess what? After one week, the market starts getting up and the share you sold previously has reached its all-time high status.
Did you get the point that we wanted to deliver through this example? Let us read it here one more time – “while dealing with the volatility of Stockmarket, it is important to keep your emotions in control. Investing is a long-time game, if you play it otherwise, you will surely lose your hard-earned money.”
Don’t wait for the right time to learn how to investing in stock market
Whoever has generated massive wealth in the stock market, had started investing in the market when others were waiting for the right time to invest.
Warren Buffet – he had started investing at the time when he was just 11 years old. In one of his interviews, he had been asked why he started investing at a very young age? He answered that he was late and should have started investing even earlier.
One clear thing is that there is no right time to start investing in the stock market. Ultimately, you can start investing right now while reading this. The only thing you should keep in mind is that “It’s always better to gather some knowledge about the place you are going.” It means that first, invest in learning about the stock market and then take subsequent informed decisions for optimum growth.
Don’t trust so-called free investment recommendations
So, you have opened your trading account. BOOM! “Here are some free investment recommendations for you.” These types of messages may look enticing at first glance. But they don’t work for the long term.
Always remember, there is nothing free in this world. Also, why would someone recommend a stranger for free tips on multibagger stocks? Doesn’t make any sense! Ultimately the point here is to never follow free investment suggestions blindly – if you want to do that, make sure to perform due diligence from your side.
It’s advisable to be surrounded by like-minded people so that more transmission of knowledge could happen. Now, you can also make your stock market community online exclusively at India’s first social media platform for investors and traders – Stockative.
Don’t follow the herd in the stock market
This point is somewhere related to the previous one. Let’s discuss this with an example: Suppose your friend invested in a company last year and made a significant return of 70% on it. Now, he is boasting about the returns he has generated on the stock that he picked last year.
What would you do when you come to know about the company that gave your friend a 70% return last year? If you are thinking of investing in that company, then you should read the previous headings once again. The bottom line is that do not invest in stocks just because your friends and relatives are investing in them – do your due diligence.
Don’t make imaginary expectations while learning how to investing in Stock market
No doubt about targeting big investment goals and many have achieved great returns on their investments. But you should see that the number of those highly profitable investments is low.
So, it is always an intellectual option to set realistic investment goals. Setting up realistic goals has two benefits; first, you would not get disappointed if you couldn’t achieve the desired goal. Moreover, low expectations lead to peaceful living. Second, the effectiveness of selecting stocks increases when you play in the market with a rational perspective.
Don’t sleep once you buy a stock
There is a notion between investors these days. They think that ‘buy a stock and forget about it.’ They do this with the hope that it would reap higher returns one day. But this notion does not work every time.
Never let your stock alone, always watch for different news and notifications about the company and make decisions accordingly.
Companies with strong fundamentals will never go weak (unless & until something extremely unfortunate happens within the organization). So, keep an eye on the fundamentals and other key specifications of the company while investing your money into it.
Do’s of How TO investing in Stock market in India
Do empower your learning before earning
This is probably the most important thing to do before you start investing in the financial markets in India. One of the greatest men of all time Benjamin Franklin had also said that “An investment in knowledge is the best investment.”
We are not saying that you should join a dedicated course on investment in the stock market in a University. Because these days, you can find mostly everything online for free. You just need to provoke the hunger to learn.
Through Stockative blogs, we are trying to empower your financial knowledge so that you could make the most out of your investment journey. Other than this, you can also read various reports, newsletters, and other forms of information that are available online easily.
Do start investing as soon as possible
We have already discussed a part of this point in one of the “don’ts of investing in the stock market” above. And we believe that you have already got the point that it’s better to start investing as early as possible. But do you know why we are asking you to “invest early”?
This is because of the compounding effect. Suppose you invest 100 rupees in the stock market for 5 years, where the market is giving you a minimum 10% yearly return on your investments every year. Let’s see the breakdown:
| Year of Investment (Y) | Amount invested and Gross Investment Value (PV + 100) | Yearly return on investment (YV) | Present value of an investment (PV) |
| First-year | 100 | 10 | 110 |
| Second-Year | 110 + 100 = 210 | 21 | 231 |
| Third-Year | 231 + 100 = 331 | 33 | 364 |
| Fourth Year | 364 + 100 = 464 | 46 | 510 |
| Fifth Year | 510 + 100 = 610 | 61 | 671 |
At the end of 5th year:
Amount Invested = 500 INR
Return On Investment (ROI) = 171 INR
Investment Amount = 671 INR
We assume that you have gained some valuable insights from this practical application on how compounding works. Also, how it can boost your overall investment value from a long-term perspective. So, start investing at the earliest to reap the best benefits on your investments.
Do diversification of investment portfolio
Having a strong investment portfolio is an essential part of intelligent investing. And diversification is the process that makes your investment portfolio stronger.
Diversification does not mean that you should invest in 100 different stocks of different companies, but investing in 12 to 16 good companies is more than enough.
When it comes to diversification, it’s always better to pick some part of all asset classes that are available in the stock market into your investment portfolio. Apart from equities, you can also consider investing in ETFs, Mutual Funds, Real Estate, Bonds, Gold, Cryptos (as per your risk appetite).
Do read the latest news and affairs happening around the Stock market in India
In the corporate ecosystem, a lot of things happen regularly. Even a piece of short news about a company can impact the entire valuation of the share price of that company.
So, to be an intelligent investor, always spend time to get updated about the latest trends and buzzes happening in the stock market. This practice will not only help you to grab better investment opportunities but also protect you from performing devastating blunders.
Do have a long-term investment strategy
Compounding alone will not work until you team it up with a long-term investment strategy. Yes, a long-term investment approach can lead to massive wealth creation. Many great investors have suggested that long-term investing is the best way to invest in the stock market. Why? Because the more time you give to your wealth the better it will grow with the help of compounding.
Ultimately, if you want to build a large corpus, invest in the financial market with a long-term view.
Do practice patience before knowing how to investing in Stock market
If you have the money to invest in the market but don’t have the patience to let the money grow, you might face losses. As we are discussing that starting early is important, staying in late is equally important. This point has a blend of different points such as starting early, investing for the long-term, believing in your investment strategies, etc.
Key Takeaways From This Chapter
- Check out
to enter into new form of social media. Start investing in stock market. - One thing to remember is that your thoughts guide your action and your actions reap results.
- If you don’t want to lose money unnecessarily in the stock market, then you have to keep your emotions in control.
- First, invest in learning about the stock market and then take subsequent informed decisions for optimum growth.
- Start investing at the earliest to reap the best benefits on your investments.
- You can also consider investing in ETFs, Mutual Funds, Real Estate, Bonds, Gold, Cryptos (as per your risk appetite).
- Believe in your investment strategies and keep investing in stock market.
Frequently Asked Questions on Investing in Stock Market
Is the stock market a good investment?
Investing in the stock market offers several advantages. It includes the potential to earn returns or an average annualized return of 12%. However, the stock market can be highly volatile, so returns are never absolute. You can decrease the risk by diversification of your portfolio based on your financial goals.
Can I become wealthy by investing in stock market?
Yes, It is indeed possible to earn money in the stock market. But the only thing you need to take care of is that you invest in the market with your due diligence. If you make any assumptions or predictions, you will likely end up losing a lot of your hard-earned money. Invest in knowledge before you invest in the stock market.
How do I begin investing in stocks?
The most common way to invest in the stock market is by using an online brokering service or a traditional full-time brokering service. When shares are first placed on the market, you can buy them via a scheme.
What do rich people invest in?
Rich investors invest in such assets as private and commercial real estate, gold, land, and even artwork. Real estate remains to be a popular asset class in their portfolios to average out the risk of stocks.
How much money do you need to buy a stock?
Depending on the business, that could be as little as 10 rupees (though remember that cheap stocks don’t certainly make good buys).
Thats amazing blog. Can you write about crypto?