When you want to start investing your hard-earned money, the first thing you need to do is research and gain some basic knowledge about the type of investments. Putting your money in any investment without researching increases your chances of losing the money. Stock investments are one of the most popular forms of long-term investment however it requires a certain amount of skill and patience. There are several ways and basic things a new investor needs to know in order to start investing in stocks.
Let’s take a look at the top 10 ways a new investor can start stock trading.
1.Research and gain knowledge about the stock market
First and foremost, you need to garner some basic knowledge about shares and how does the market work. There are two types of stock investments – long-term investment and intraday trading. In case of long-term investment, the stocks are invested for a longer duration. One of the advantages of investing for a long-term is that you don’t have to dedicate a lot of time on a daily basis. Also, the stock offers sizeable returns as when you invest it for a longer duration. On the other hand, intraday trading requires more time as the buying and selling of shares have to take place during the market hours. Also, you need to learn the technical analysis of the stock if you want to conduct successful intraday trading.
- Open a trading and demat account
A new investor will have to open a trading and demat account befo
re investing in shares. CDSL and NSDL are the two depositories in the country that provide demat as well as trading accounts to investors. A demat account works like a bank and holds shares in your name as you cannot physically possess them. Once you buy the shares of the company, it will reflect in your investment portfolio. In order to enable seamless fund transfer, the demat account is linked to your savings accounts. Opening a demat account requires documents like PAN card as well as passport or driving licence as address proof.
In addition, you will need a trading account to buy and sell shares in the stock market. A trading account facilitates the buying and selling of the shares. You can open a trading account online by approaching any of the brokerages such as Zerodha, HDFC Securities, ICICI Direct, Axis Direct, and so on. Make sure to compare brokerage rates before opening the account. With a trading account you can not only invest in stocks but also in mutual funds and hold them in a demat account.
- Refer books and finance magazines
In order to learn about the nitty-gritty of the stock market, you can refer to several books and magazines. The Intelligent Investor, Think fast and slow, and Common stocks and uncommon profits, are some of the popular books that have deep insights about the stock market. A bunch of finance magazines, blogs, and websites like Bankbazaar.com also offers a detailed analysis of the popular stocks.
- Online courses
In today’s era of digital age, you can learn a good deal about stock trading by taking up online courses. Various websites like Coursera and Udemy offer courses on financial stock markets.
- Follow the market
New, as well as old investors, should always keep a tab on the market trends. Financial papers, news channel and popular publications can be good resources to stay updated about the stock market. New investors can monitor the markets, get third-party analysis about stocks, economic concepts and general business.
- Stay away from market gossip
Try to avoid market gossip about a company or its stock price. Also, never fall for tips via SMS or email about investing in a particular stock as it may be misleading. It is important that as a new investor you stick to your investment plans and don’t change it based on a market gossip as you may end up losing money.
- Don’t follow the herd mentality
Never follow the herd mentality and make investment-related decisions. Don’t get affected by the market noise about a particular stock and buy or sell a stock in a hurry. Make sure you are not investing blindly in a stock without doing thorough research. Always have a concrete reason and logic to buy a stock and never buy or sell a stock by taking emotional decisions.
- Diversify your portfolio
A diversified portfolio is one of the keys to become a successful investor. You should make it a point to spread your investments across several companies that belong to different sectors. Never put a chunk of money in a single stock as there is a high risk you may end up in a loss if the stock does not perform well. With a diversified investment portfolio, you minimise the risk of losing your investments in one go due to sudden market variations.
- Set realistic expectations
Investors should always keep realistic expectations from your stock investments. The stock market is volatile and there is no guarantee that a stock will follow the same pattern and give you the high returns. The stock market changes periodically owing to several factors like economic condition, political stability, and so on. Hence, it important to analyse the market condition before expecting any type of returns from your investments.
At the end of the day, it must be noted that the stock market is not a gamble and you need to put in efforts to become a successful investor. Also, it is important that you should be patient when it comes to stock investments. In order to get sizeable returns, you need to let the stock play it course in the market. Once you get the hang of stock trading, you will soon be able to build your own investment strategy after several trial and errors. As a new investor, you should definitely take the aforementioned points at the time of investing in stocks.