Want to start investing? Learn how to invest in Securities (stock) Market for beginners so that you can earn profits.
Stock Market in general refers to a platform where you can buy and sell shares publicly and create better opportunities for wealth creation. These financial actions are undertaken by a financial intermediary and follow a set of regulations provided by a governing body like SEBI (Securities Exchange Board of India).
In this article, we shall be learning the top 5 ways to invest in stock market for beginners and earn smart returns.
What Do Stocks Mean
Stocks refer to the investment that makes you a partial share holder of a company. It represents the public ownership of a traded company. Buying stocks of a particular firm will help in its overall growth and provides you with shareholder voting rights.
Different types of Stocks
Mainly, there are two different types of Stocks:
- Common Stocks: The value of Common stocks depends on when they are traded. Owners of this stock can vote for any corporation’s affairs like the Board of Directors, mergers and takeovers. However, in case of a bankruptcy, these owners will be the last ones for a payout.
- Preferred Stocks: These stocks refer to the ownership stake of a company. The investors of these stocks shall receive the exact amount of dividend because their dividend payments are fixed.
The other types of stocks include:
- Growth Stocks: These stocks earn rapid growth but do not pay any dividends. Further, the stock prices will still be rising, even if the investor is not making any profit.
- Value Stocks: These stocks are trading at a lower price than its fundamentals. They do not rise much and belong to a few large companies that are not very new.
- Blue-chip Stocks: There are certain stocks that remain still for many years and have been proved to be reliable companies. These investment structures are safer and are also sometimes called ‘income stocks’.
How to invest?
Given below are the top 5 ways on how to invest in stock market for beginner. Let’s begin.
1. Choose Your Investment Profile
Before committing your money to the market, decide what type of investment you prefer. Are you willing to take risk? Some investors actively manage their profile while investing and forget about it.
Ask yourself if you are an analytical person and is enjoying the crunching numbers or you are a busy person and don’t have time to analyze stocks. Depending on the investment preference, you should select the type of security (Equity, Derivatives, Mutual Funds, Bonds, etc) you would like to invest in.
2. Select your Investment type
Before learning how to invest in stock market for beginners, choosing the right investment type is important. While opening an account with a full-service share broker like SMIFS, you will be asked about your investment goals and the risk-management capability.
You also need to have a clear knowledge about the trading and investment process of stock market. The easiest way to survive in the game of stock market is to maintain a diversified portfolio and stay invested.
Factors to invest in stock market for beginners
- Investment Objectives: To understand how to invest in stock market for beginners, determining the financial goals is very important. However, these goals may change for every individual investor and also on the stocks they select.
- The risk-bearing ability: As investors, you should also be aware about the risk-capacity. If you are new to the market, you should start investing in defensive stocks in order to get better returns and be less affected by market volatility.
- Diversification: By creating a diversified portfolio, risks can be managed. Also, the investments can be spread to different sectors so that the financial threat is lowered.
3. Selecting the right time to invest in Stock Market for Beginners
The only way to invest in stock market for beginners is by opening a Demat Account and a Trading Account. Now the question arises, ‘What is a Demat Account and Trading Account?’ So, let’s get started.
Demat and Trading Account Opening
A Demat account is a place to store the bought stocks. Without this, it is not possible to invest in the stock market for beginners. Just like a bank, the Demat Account stores all the securities that can be later used for the purpose of trading.
The Trading account on the other hand, can be used by a person to buy and trade securities from the market. Both the Demat Account and Trading Account are listed under the primary exchanges namely the Bombay Stock Exchange and the National Stock Exchange.
Linking Bank Accounts
After opening a Demat Account and Trading Account, you will have to link your bank accounts with your Demat account so that you can enjoy uninterrupted flow of cash for the buying and selling of securities.
Documents for Opening Demat Account
The documents required for opening a Demat Account and Trading Account with SMIFS include:
- PAN Card
- Address Proof
- Pre-printed Cancelled Cheque
- Latest Photograph
- Scanned Signature
You can also refer to the ‘Steps to fill an e-KYC form’ for further reference.
4. Invest in stock market for beginners with little money
To invest in stock market for beginners, clients should realize that this market requires a long term investment. But, it is not necessary to invest high amounts in the stock market. A beginner should know, that he/she cannot enjoy the fruits of this investment without the completion of the investment period, irrespective of the money invested.
Further, not the entire amount should be used for investing. It has also been observed that with the growing age, the investment ratio is reduced due to the less in-flow of money. Therefore, allocating assets at a young age can benefit clients for a longer time span.
5. Buying stocks for Beginners
Create a brokerage account to invest in stock market for beginners. Also start thinking about the investment process that you will be following. The objective of buying the right stocks should involve you becoming part owner for companies you would like to invest in.
You can also go through the company’s annual reports so that you can get an idea of the working of the business.
What are the risks associated with Investing?
While investing, you will be committed towards creating a financial goal for upcoming future. To invest in stock market for beginners, one has to understand that such investment will also be associated with a certain degree of risk.
Stock market never guarantees its customers with fixed profits. Thus, there is always a possibility that the invested money will not give expected returns. For this reason, clients should take help from an investing advisor and ensure if the financial goal should be short-term or long-term.
Since you have learnt about the ways to start investing in Stock Market, you can now open a Demat account with a broker. SMIFS is offering its customers with free Demat Account and is charging a low brokerage. Our research team will help you take decisions for choosing the right stock and also update you with regular reports.