Simple guide of how to invest in stock market

Whether you work as a freelancer, in a company or you have a business - there is one goal that is to make money. We all want to save money and we keep our hard-earned money to banks - mostly in Fixed Deposits (FD). However, most of the banks gives low return w.r.t interest rate and hence your money isn't likely to grow more as per your expectations. However, you may have heard about "stocks', "mutual funds", "shares", etc and other related terms quite a bit in news, YouTube etc. today we are going to learn about these all-in details. Although I will try my best to keep in short for your better understanding.

Stock market involves about trading of money.

Investment:

In simple terms, investment is an asset or to buy something with an aim to generate income or to expect more returns. For example, if Vikram invests purchase a plot of Rs just 1 lakh today, that same plot price will be increased in near future due to increased demand. However, it depends on various factors such as where the plot is located, population, infrastructure etc.

It depends upon which form of medium you choose to invest - it could be stocks, bonds, mutual funds, etc. or any other type of investments. However, you must also know that there can be risk too, i.e., you could lose your money if you don't invest it properly. So, study the market regularly and invest only if you can afford to lose.

 

Stocks:

Stocks are basically shares of ownership in company/organisation. A share on the other hand, can be defined as a portion of ownership or a percentage in a company. For example, let's say tcs is listed on stock market and it's each share cost is Rs 2000/. So, if you buy 3 shares, u automatically become a shareholder or own a portion of tcs company.

 

Equity:

Simply put, equity means how much stake an investor is having in the company. Generally, it’s the owner that has the largest stake. It can be also defined the capital amount invested overall or how much share is owned by the owner.

 

Stock market:

It’s the place where many companies trade. Both the players – the buyers and sellers come together under one platform and trade in share market. The market gives the detailed information that investors require post purchasing a share from a company.

 

Initial Public Offering:

It is a process wherein a company becomes public from private company. Reason companies launch an ipo is to generate capital for the company to further expand its business. Once ipo session ends, shares get listed on exchange companies. After listing, one can buy and sell shares.

 

Exchange companies:

In India, National stock exchange and the Bombay stock exchange are the two exchanges wherein buying and selling of shares takes place. When a new company get’s listed, they become public companies.

Indices

There are two major Indices in India.

Sensex (Comprising top 30 companies of India according to their market cap) 

and Nifty 50 (Comprising top 50 companies of India according to their market cap).

In both the indices top 30 companies are common. 

So mostly both the indices move in the same direction.

There are also some other indices like, BANK NIFTY (comprising top private and psu banks), 

FINNIFTY (comprising Top private and psu banks and financial institutions) 

Nifty IT (comprising Top IT companies) 

Nifty metal index( comprising Top metal companies)

Nifty India consumption (comprising FMCG and other consumption related companies)  

Nifty Pharma index (comprising Top Pharma companies)

Nifty Auto

(Comprising top Auto mobile and auto anicilliary companies)

Nifty Realty, Nifty Infra, Nifty Energy,

Nifty next 50, nifty midcap index, Nifty small cap index and so on..

Please remember each company has different weightage in every indices 

For example, the reliance in india or macbook in usa have  majority of weight thanks to highest float shares. This method will be considered as one of the best method for traders because they know the value of liquidity in stocks.

where as HDFC Bank  is 2nd with 9.23% weightage where as BPCL with 0.43% and Hero Motocorp with 0.42% are the 2 lowest weightage nifty constituent.

Same logic is applied for other indices too.

 

SEBI:

Security and exchange board of India was established in 1988 to protect investors from frauds, to promote development and regulate trading market, recognising brokers and agents etc...

 

Working of stock market:

When you want to buy a public listed stock from stockholders, transactions happen on stock exchanges. They find buyers and then matches with seller, and for each trade they charge commission.

 

Steps to invest in stock market:

Now that have you got basic idea how stock market works, investing here is quite simple. Follow these steps:

 

Step 1: Open a demat account and get it linked to your bank account for carrying out transactions. This account is used to hold shares and securities in an electronic form, just like bank accounts.

 

Step 2:  Register your demat account either through mobile based apps or through web platform.

 

Step 3: After successfully registering and providing necessary documents, you can start trading. (See which documents are needed after step no 5)

 

Step 4: Pick a stock of your choice you want to invest. Just make sure you have enough money to buy those shares you want to buy.

 

Step 5: Buy the stock as per the listed price and specify the number of shares.

 

Documents needed while opening demat account:

·      PAN card

·      Aadhaar card

·      Bank account

·      Passport

·      Driving license

·      Any other documents issued by state/central government.

 

Note: - Your Aadhaar card and pan card must be linked together as per the central government’s rule.

 

Trading apps in India:

There are many apps in India you can choose. Groww, Zerodha and Upstox are some of the examples trading platforms. I use Groww app for trading.  However, I would recommend doing your own research before going for these apps.

 I use groww app and if you want to use kindly refer this link: -https://app.groww.in/v3cO/d4ffpd9i 

Taxes on investing in stocks:

There are 2 types of capital gains:

 

1)Short term capital gain (STCG):

It can be termed as a profit earned from shares or investment, that has been held for just one year or less.

 

2)Long term capital gain (LTCG):

If your investment holding period is more than one year, it will come under LTCG. If selling price of your shares is more than purchase price, that will be counted as long term capital gains. When the shareholder earns more than 1 lakh after selling shares, a tax of 10% will be levied depending on the income slab.

 

Intraday:

Simply put, intraday means buying and selling stocks on same trading day. Also known as day trading. If you are confident enough, you can go for it.

 

 

Factors before going for stock market investment:

1)Objectives:

Everybody has aim, so does you. Identify your financial goals and then buy stocks, depending on your needs.

 

2)Risk bearing ability:

Buy only those stocks you can afford to lose. Study that company properly you are going to buy their shares. Afterall, you are the owner of money.

 

3)Diversification:

Don’t put all stocks in one basket, meaning you should not invest in just one industry. Buy stocks in different areas such as technology, food companies, steel companies etc... to avoid the stock market volatility.

 

4)Managing your portfolio

Performance matters in every field. Don’t just invest and then forget about them. Keep an eye on performance of your portfolio/stock. When you are close to retirement age, try to move maximum share to safe options.

5)Investment horizon

To get the best return in stock market, you should be invested for longer period (Minimum 5 to 10 years, the more the better)

It takes out the risk of market volatility and economic ups & downs.

Instead of timing the market you should give time in the market to maximize your return. 

Nobody knows when The market it will go peak or will reach bottom.

You should invest regularly in a disciplined manner to take care out the market ups and downs.

This is called "Rupee cost averaging".

In share market, portfolio may go up or go down , But you should not get panicked when your portfolio becomes negative.

In every dip in the market, that is an opportunity to invest more and get better return 

You should stay invested for longer period and continue with your investment regularly.

 

Conclusion:

The market is fragile and volatile. Like our life, the market also sees ups and downs. Hence it is advisable to regularly check news and updates regularly. Make sure to invest your money regularly to lead a stable life in coming days. The stock market is huge and there are many more factors while investing, so study them property.

You can gain more information here: - https://www.tickertape.in/blog/how-to-invest-in-the-stock-market-beginners-guide/

 

The investments are always are having risk. So do it carefully.

 

It is my first blog so feel free to comment. 😊