Stock Market Investing in India: A Primer | The stock market is confusing to many. Most Indians are never taught about stock markets. They also view stock markets as gambling and hazardous. Investing properly reduces risk. Let’s learn how to invest in the Indian stock market in this complete guide for novices.
What Is Stock Market Investing?
In straightforward terms, the stock market investing is a location where shares or stocks of any listed company are traded on exchanges.
What Is Share?
Shares are company ownership. If a firm is worth 100rs and you buy 100 shares and keep 50 for yourself and 50 for your friend, you own 50% of the company.
Who Sells Shares and Why Do Investors Buy Them?
Growing companies need money. It can borrow. It must pay interest on loans. If a corporation borrows and invests, sales money will return within 3 months. So corporations may struggle to make bank payments. Share now. The person will sell some ownership to investors for money. When the company earns money after three months, all owners will benefit.
Thus, investors buy shares and firms raise funds through IPOs. After the IPO, shares will be traded by numerous investors on the listing date. On the listing date, IPO stocks will be traded on stock exchanges, and people who bought them can sell them.
What Is Stock Exchange?
Stock exchanges buy and sell stocks, as the name implies. IPO investors receive shares in their Demat accounts. After IPO, IPO shares can be bought and sold based on demand and supply.
Two Indian stock exchanges handle most trades. NSE and BSE. Stock exchange trading is indirect. Demat accounts allow exchange trading.
Reasons for the Highs and Lows in Stock Market Investing
Demand-supply law. Share prices rise when demand is high and fall when sellers outnumber buyers. Why would someone buy firm stock? Many reasons !!
Learning The Basics Of Stock Market Investing
Demat and trading accounts allow stock market investing and trading. India’s largest stockbroker, Zerodha, is great for newbies. Stock market investing begins with a Demat account. Let’s use our Demat account after opening it online.
ALSO READ:- How Does The Stock Market Pay Off?
Generally speaking, there are two main approaches to investing in India’s stock market.
1. Through Mutual Funds
2. Through Directing purchasing Stocks
Beginners should invest in mutual funds. When you acquire mutual funds, a group of experienced and professional fund managers buys and sells shares on your behalf for minor management fees. They handle everything better and with less risk and capital protection. Your return may decrease.
If you know stocks, you can invest. This is riskier than mutual funds but yields higher returns. Create a portfolio of 8-10 equities from different sectors. Diversification ensures that even if one stock or sector performs poorly, others may. This requires stock selection skills.
Investing Wisely: How to Choose the Right Stocks
Fundamental research is needed to choose the finest stocks for investment. Based on prior financial performance, you must predict if firm earnings will rise. Good companies have these traits.
- Successful Administration.
- Positive Sales Development
- Positive Profit Margins
- Good return on equity and a culture of rewarding shareholders with bonus stock and dividends (shareholders fund)
- Strength in the diversity of offerings
After choosing good stocks, diversify your portfolio with 10-15 stocks. Diversification reduces stock-specific risk by allocating small amounts to multiple stocks.
Follow Us On Instagram