5 smart tips for beginners in the Stock Market
The Indian stock market offers a plethora of investment opportunities. With a wide range of investment instruments offered in this market, you can achieve several significant personal and financial goals. Disciplined, timely investments can help you create a long-term corpus. However, stock trading is volatile and not completely risk-free as prices of stocks can fluctuate rapidly. As such, you need to be prudent with your investments. So, if you’re just entering the stock-investment world, here are five tips that could prove beneficial.
Only invest what you can afford to saveInvesting as per your affordability is the primary mantra that you must constantly keep in mind each time you buy a stock or other financial assets in the stock market. You must always invest after taking stock of your risk appetite. Instead of blindly following the ‘high risk for high return’ philosophy, you must calculate the long-term ramifications of your investments. A bad investment can cost you a lot, which is why you must always proceed with caution. For instance, investing money that is necessary to fund your basic living expenses in the stock market is a bad idea. Instead, you should create a budget, deduct the amount you need for comfortable sustenance, and put aside some savings. You can then use the surplus amounts to invest in the stock market
Look for the right investment partnerIndian law stipulates that you must have a bank account, a demat account and a trading account in order to trade in the stock market. The provider of the trading account will charge a commission per trade, so do conduct a thorough assessment of various brokers and their rates and services offered before choosing one that meets your requirements. While good brokers would provide a wide range of services essential for decision making and tracking of your investments, others may charge less but only help you make transactions. Look for one that will aid you with the correct data needed for your decision making
Research, Research, ResearchBefore you start trading, it is imperative that you conduct your own research and deep dive to understand the system as well as the stocks you want to buy or sell. Do you want to invest for the long term, or short, or both? If so, which stocks fall under these categories? What are the market indicators and other factors which should or could influence your decision? Without research, you will be depending on just pure luck. The more you learn, the more you can potentially earn
Start with low-risk stocksInvesting in blue chip stocks minimises the chances of losing all your money. They may cost more, but they are less risky. Other stocks worth considering are those of companies involved in everyday consumer staples i.e. fast moving consumer goods (FMCG), which are usually subject to a lot less volatility. Utility companies and government bonds are also worth considering, although their growth patterns are quite slow. In other words, as a beginner avoid looking for a quick kill
Stay coolAs mentioned above, the stock market is indeed a volatile place. However, you must ensure that your reactions do not mirror the volatility of the market. Make sure you never make impulsive, emotional decisions out of greed or fear. Instead of panicking at the performance of the stock you must have a broad strategy and stick to your plans. Yes, it may seem tough to stay calm in the face of the storm, but if you are patient, your investment will pay off
As a beginner in the stock market, it is recommended that you avail services from brokerage firms or big bank subsidiaries offering all-round investment services that help ease your investment journey.
Disclaimer: ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.