Investing in stock markets is a great way to create wealth over a long period of term & get better returns as compared to other financial products. But do you know How to Invest in the Stock Market?
Investing in the stock market in India is very easy, you just a need Demat & trading account to get started which can be opened with any stockbroker easily using online process sitting at home. That’s it After that you can start investing in stocks.
Before you start investing in stock markets, you need to first understand what is stock market and how does it work?
Why you should invest in Stock Markets?
Before you know how to invest in stock markets, the first question to be answered is why you should invest in the stock markets?
The main reasons why we should invest in the stock markets is for better returns than any other similar financial products like Mutual Funds, PPF, Debt Securities. Secondly, the investor is confident that he can make direct stocks selection & his investments portfolio of stocks would generate better than market returns i.e. return more than that of Nifty or Sensex.
If the above two conditions are satisfied, then one should invest in stock markets, but even if one of them is not satisfied then he should look for options such as Mutual Funds for market-linked returns.
Now that you have understood why to invest let us look at How to Invest in the Stock Market.
Get A Broker & Open Demat Account
The first step towards investing in the share market is to open a Demat account with SEBI registered broker. The broker is the intermediary between you, stock exchanges and the opposite party. You cannot invest in stocks without a stockbroker.
In India Broker’s are of two types Discount broker & full-service broker. The discount broker offers free delivery of shares (When you hold shares for more than 1 day) & Charge minimum brokerage on intraday trade (When you sell the shares on the same day). On the other hand, the full-service broker offers extra service such as relationship manager. desk to trade etc. for a very high brokerage fee. We recommend beginners, to begin with, the discount broker as they charge less brokerage and offers maximum returns.
In India Top, Discount brokers are Zerodha Securities, Upstox, 5 Paisa Capital etc. At Prate Markets we use & recommend Upstox. Upstox is a tech-first low-cost broking firm in India providing trading opportunities at unbeatable prices. Upstox offers free trading in Equity & flat Rs.20 per order for Intraday and F&O.
Start Investing in Stocks
Now that you opened your Demat account, the next step is to start investing in stocks. But before you start investing in stocks directly there are few points you should consider to maximise returns on your investments.
1) Set a Budget for Investment – Whenever you are starting fresh in stock markets you set a budget for your monthly investment. For Ex. It could be 10% of the Salary or Such figure suitable for you. Make sure you invest regularly as per your budget & do not increase/decrease the amount due to market fluctuations. For Ex. When the market falls steeply you should not decrease the Investment amount & when the market rises you should not increase your investment budget to invest more in the greed of better returns.
2) Identify your Investment Goals – Always before making any investment identify the goal you want to fulfil with the investment maturity. You should link your investment with goals like buying a new house, retirement, child education etc. Linking investment with goals helps you to make selling decisions as you know when to sell your investments
3) Identify Stocks to make Investment – Now coming to the most difficult phase of stock market investments. I cannot stress how important this step is for your investment future. Make intensive research over which stocks to invest, make a portfolio of 10-20 stocks do not invest all money in 1-2 stocks it can be risky. Invest over a long period consistently.
4) Invest for the long term – Final step is really easy to be said but difficult to execute. After making the first 3 steps correctly you should follow this one as well to create maximum wealth for yourself. If you do not invest for the long term and sell your investment in market fear or for short term profit you miss out on compounding benefits which take off in the long term.
FAQ for How to Invest in Stock Markets
Q1) How much money do I need to invest in stocks?
There is no minimum amount you can start with any amount as long as it is sufficient enough to buy 1 share in which you want to invest.
Q2) Can I Invest Online?
Definitely you can invest in stocks online, most brokers have an online website and mobile app where you can trade easily. If you are not comfortable trading online you can opt for Call on Trade where you can call & ask the broker to buy/sell on your behalf.
Q3) Are stock markets risky?
Yes, stocks markets are risky if you don’t know what you are doing. If you are investing in stocks just because of your friend/neighbour invests then it is risky, If you are investing just because you received a tip on Mobile SMS then it is risky. You should always do your own research and invest in fundamentally strong companies with a sustainable business model and Clean Balance Sheet with Strong Management. If you follow these steps then stocks markets are definitely not risky.
Q4) Should I do Day Trading.
You can do day trading, but we recommend to avoid day trading & you should invest in Good Companies for long term for better wealth creation. Day Trading is highly risky with very low success ratio for new investors. Avoid Day Trading & Prefer Long term investment.
Also Read – How to Make Money by Investing in Stock Markets?
Also Read – How to Make Money by Investing in Mutual Funds?
Hope you are able to understand How to Invest in the Stock Market in India. If you any question do let us know in the comments section below and we will make sure to reply and Thank You very much for reading.