Lack of awareness or wrong examples of people losing money in the stock market has restricted the Indian population from exploring the most dynamic investment market which is the stock market. The majority of the population still believes that stock market investment is gambling or speculation. However, if you are trying to explore this market and start to invest in Stocks, then here is everything you need to know about the stock market before you step in.
What is the stock market?
A stock market can be defined as a virtual market, where stocks and other forms of securities are purchased and sold. Companies issue stocks to acquire capital for their business need. The investors purchase these stocks and then trade them in the market. So, when the stock is first issued by the company, it is known as IPO, and it is done in the primary market. Then when the stock is sold in the secondary market by the first investor it is available for trading and investments. Usually, by stock market investments, people refer to the secondary market, where the main trading takes place.
SEBI is the regulator ofstock markets in India. The stocks are listed on stock exchanges and the two largest stock exchanges in this country are NSE and BSE. There are stock indices which are like parameters for measuring the stock market performance. The most followed stock indices are Nifty 50 and Sensex.
How can you invest in the stock market?
For investing in stocks, you need to open a Demat and trading account. Since the stock market and investments are completely digitalized, without a Demat and trading account, you cannot invest or trade in the market.
You need to find a stock brokerage house or mutual funds distributor who offers Demat and trading services. Then once you have your account, you can log in to the trading terminals or the applications and track the stocks that you want to invest in.
Before investing in any stocks, make sure, you do a complete analysis of the company and the industry. This will help you understand the prospects of the stocks. You can also take the help of the financial advisors offered by mutual funds distributors.
When you are starting with your investment, it is best to start with one or a few stocks. This will help you understand the company better. When you are new to the market, if you invest in many stocks, tracking them, and understanding their performance would be difficult.
Another thing to consider is if possible invest in the stock of such companies that you use in your daily lives or you know. This will help you understand the stock’s performance better.
What are the benefits of investing in the stock market?
Investing in stocks comes with multiple benefits which include the following –
Even if you are investing in large-cap stocks, you can generate higher returns than traditional investment vehicles. While the returns from mid-cap and small-cap are exorbitantly higher compared to conventional instruments.
By investing in different stocks across market capitalization, you can build a strong, well-diversified stock portfolio which will help you minimise the risk involved in stocks and optimise returns.
You can achieve your financial goals easily if you can invest in the right stocks.
Risks involved in stock investment
That said, there are certain risks in stock investing for beginners as well. The stock market is bound to be volatile, so keeping your emotions separated from stock investments is crucial. Many investors lose their money and capital due to greed in this market. The best way to invest is to analyze, invest and track performance.
As a beginner in the stock market, one should invest more time in learning about the market than in investing. It will help them understand the market better. Once you can understand how the market works, you can invest wisely and generate better returns.