Making money from stock market tips for beginners…
In India only 0.5 percent of the population are investing in Stock Market, and the market is growing. Initially the market was called as a gambling place. The situation has changed. Thanks to technology and communication system. The bankers have opened securities services. They are promoting Mutual Fund investment and equity investment. The benefits are many but a new investor should be cautious. Your every penny is precious. The rules are as follows:
Keep your eyes open before investment:
Research doesn’t mean ‘read a lot’, but keep your eyes and brain open. Watch your daily activities carefully – If you are using any specific brand to brush your teeth ,if you consume a certain brand of toned milk,think of these brands as an investment. In the same manner you can start observing all daily utility brands. Now check if those brands are available in the share market. Google about it and gather information of its last one-year price fluctuation. You can visit several online forums too, but I do not suggest visiting those initially since they might confuse you.
Financial health of that company:
An investor is not a Chartered Accountant. He doesn’t have an education in reading balance sheets. But he can collect some information before investment – Debt Free Company or not, Dividend paid or not. The other terms you should be aware about are.PAT, EBITA, D/E ratio, Industry PE, Book Value etc.
Debt Free: Company does not have any loan in its account.
Dividend: Sharing profit with his shareholders.Advertisement
Start investing through SIP:
SIP is systematic investment plan through which you invest on a monthly or weekly basis. You can start investing in bits and pieces. Figure out the stock you want to invest in and then put your money into it phase by phase. You can invest in more than one stock to reduce the risk factor. It is always advisable to make such plans for one or two-years at least. More than one year investment in stock is tax-free as well. If you invest at the right time you have a greater chance of getting a benefit of yearly 25 to 30 percent. The other part is to rely on your brokerage firm’s research.
Investing in stock for a short period isn’t a good practice. It is called short-term trading. To do short-term trade you should have experience. Better avoid it in the initial phase of your investment life.
Practical problem of a “Newcomer”:
The moment you start investing you will start receiving phone calls from several brokerage firms and financial advisors. Every brokerage firm provides you with a Relationship Manager whose intention is to guide you to generate wealth, but there is contradiction as well. He has a conflict of interest of generating wealth for his brokerage firm and himself. So he guides you as per his need. It is better to rely on your individual research and on the research of top brokerage houses. They are all SEBI registered. SEBI is Securities and Exchange Board of India. You might discover new terminologies through them: derivative, option, PE, CE etc.
Please try to avoid everything except buying branded stocks for long-term. On any day long-term investments will yield more returns than short-term trading.
Must Read : Biggest surprise about getting rich.