Stock market investing has been a popular option among investors for decades. If you are an amateur investor who wants to learn about the stock market and equity investment, here is your handy guide.
What is Stock Market Investing?
Stock market investing refers to the trading of financial instruments in a common marketplace. You can buy or sell them to earn potentially high returns and grow your wealth. You can trade in the following investments:
- Stocks
- Mutual funds
- Bonds
- Commodities
- Derivatives
- Currencies
- Futures and options
- Exchange-Traded Funds (ETFs)
How to Invest?
You can follow these steps to begin your stock market investing journey:
1. Open Trading and Demat Accounts
Before you start trading in the stock market, you need to open a trading and Demat account. You can reach out to a registered broker or an online registered firm who will help you fulfill Know Your Customer (KYC) and other process formalities to open these accounts. After successful verification, the accounts will become active for you to trade.
2. Know Your Risk Appetite
Risk appetite is the capacity of an individual to bear a financial loss. Every investor has a maximum risk level they can take in stock market investing. Risk appetite is dependent on your age, income, the number of dependents, investment horizon, and several other factors. For example, if you are in your late 20s and unmarried and have a stable income, your risk appetite can be high. You can risk more exposure to equity funds. However, if you are in your 40s with a family to take care of and loans to pay, your risk appetite is low and you may prefer debt investment.
3. Familiarise Yourself and Research Properly
Stock market investing needs in-depth understanding because market volatility plays a crucial role and you should be able to reap profits at the right time. So, instead of jumping straight into investing, make yourself familiar with stock market jargon, strategies, platform, investment options, trading costs, etc.
You should thoroughly research a stock before investing. You can analyze a company’s financials, management, vision, previous stock performance, etc. This way, you will always make informed decisions.
4. Diversify Your Portfolio
You must have heard of the maxim ‘do not put all your eggs in one basket’. When it comes to investing, it means that you should diversify your portfolio and invest in different asset classes and securities. It will limit exposure to a specific investment instrument and the risk of loss arising from it. A diversified portfolio will minimize the risks and maximize the returns.
5. Keep a Long-Term Horizon
Stock market investing is not about selling stocks to earn money overnight or within 2-4 years of investment. You can earn high returns only if you stay invested for at least 7-10 years. Ideally, the longer you hold, the better it is. A long-term horizon will help you to build a significant corpus size.
One of the good ways to enter the stock market is through investment advisory or portfolio management. There are many reputed companies in the market and one of them is Purnartha Investment Advisers Pvt Ltd. The team at Purnartha can handhold your way through stock market investing. Their focused approach and in-depth portfolio management services aim to ensure that you generate alpha on your investment. You can get in touch with them to know more.
Based on the recommendations which are generated for the portfolio of investor in the Mutual fund software for IFA advisor suggests investor to increase investment in particular segment of equity commodity or to raise the savings for continuing the investment in future.
In such manner the image of investor’s portfolio improves.
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