How to start Investment in the Stock Market

By.. Mr.S kumar a financial consultant

Investing in the stock market is one of the best ways to stay ahead of inflation in the long term. In other words, the goal is to invest your money to work in one or more types of investment vehicles in the hope of growing your money over time.

Legendary investor Warren Buffett defines… “Investing is described as the process of laying out money now in the expectation of receiving more money in the future.”

In this article, we will walk you through how to get started as an investor and show you how to maximize your returns while minimizing your costs.

The biggest misconception around stock investing is that you need a large sum of money to start, or stock investment is reserved only for the ‘wealthy’. Such misconceptions rob novice investors of the benefits of starting early and growing their wealth since they keep waiting on the sidelines to save enough first. The good news is, you can start with as little as Rs 100-500 in the stock market and enjoy the wealth-generating potential of this investment avenue. Keep the following things in mind to know how to invest in the stock market with little money.

What Kind of Investor Are You?

Before you start investing your money, you need to answer the question, what kind of investor am I? When opening a brokerage account, a broker will ask you about your investment goals and how much risk you’re willing to take on.

While earning returns is an obvious answer, what do you plan to use the funds for? Are you trying to save for your retirement? Or, do you intend to buy a house in a few years? Maybe, you want to create a corpus for your child’s higher education? Based on the goals, you will be able to define the timelines and the type of returns you need.

Assessment of your risk tolerance

This is an important aspect as it helps you choose the right kind of investments (in general) or stocks (in particular). Try to gauge which risk bucket you identify with:

High Risk
Medium Risk
Low Risk

Find a broker: You need a broker to buy and sell shares in the stock market. A broker is an entity registered with SEBI, the stock market regulator, and the exchanges NSE and BSE. Choose a broker after comparing the brokerage plans and services offered by different brokers. Go for a brokerage plan as per your investment needs.

Brokerage is the fee or commission charged by the broker.

Open a Demat account: Opening a Demat account is a simple process. You will need your Pan card, savings bank account, Aadhaar card, and a personalized cheque. You can either apply online through NSDL, CDSL, or ask your broker to do it for you. A Demat account is needed to hold shares in a dematerialized or non-physical form.

Open a trading account: Opening a trading account is also a simple process. You will need your Pan card, savings bank account, Aadhaar card, and a personalized cheque. You can either apply online or ask your broker to do it for you. A trading account is needed to buy or sell shares.

Once you are through this, you can start investing. Here are some worthy points to make your stock buying experience succulent.

Retail investors are usually asked to stay away from trading of shares daily. Know your reason to invest in shares.
Keep an eye on your shares. Unlike mutual funds, most stocks will have exit time. If you miss the exit, your stock may end up in losses.
Stay updated with all the news about your stock. A piece of negative news can drag prices down.
Do not follow the herd mentality. Never buy a share just because your friend bought it or because you got a tip on the WhatsApp group. do your research.
Once you meet your goal of investing in the stock market and have a basic understanding, you can go ahead and buy shares across industries to ensure proper diversification of your portfolio.

A successful investor does not take chances – he makes informed decisions and invests his hard-earned money into stocks that are strong enough to be successful. Invest wisely.

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