A beginners guide to Stock Market Investment 

The stock market these days abounds with stories about a friend, relative, or neighbor making bigger returns in the markets. You may hear such rosy pictures but seldom do you hear about losses. Though the stock market, no doubt, gives excellent returns, however, you must learn to be extra cautious and beware of the hype otherwise losses are not far away. Here are some tips for beginners! 

Start Small
If you are doing anything for the first time, you will take baby steps. Like if you are swimming for the first time you will be going in shallow water and not a deep full-fledged pool. And of course not a sea or a river.  A similar principle applies in stock market investment as well, start small. Don’t think of overnight riches, the stock market gives you good returns but you learn by investing small. Wait and watch how the stock moves. Which factors are influencing the stock movement? Surely, over a period you will start picking things and become more sure of what you are doing. Only invest an amount that you can afford to lose.

Read and Stay Well-Informed 

Stocks are not living in a vacuum. There are multiple things that impact their performance. The macro factors can impact the stock inflation figures, interest rates, political factors, rate of growth of the economy. These things are in no one hands (that explains the volatility of stock prices). There are company-specific issues too- performance of the company- the sector on which the company operates may be beneficiary of government policies (EV bus manufacturers) or may suffer from them. Some adverse effects (companies offering online games). Again these are not in one’s hand but mind you there is some information that flows before policy announcements are made, so being informed always helps. And remember knowledge never fails. You should read at least one business daily and one online business platform.

Diversify Your Investment

If you are a beginner learn never to concentrate your money in one sector, leave aside a single stock. At least invest in 4- 5 companies. Though your investment might be small even then diversify. That helps in mitigating the risk and even a good Mutual Fund manager does the same.

Avoid Stock-specific Tips

You have heard of a term called Honey Traps. These stock tips offered on multiple channels are nothing but honey traps. They offer half-cooked information and should be strictly avoided. Don’t know why SEBI is allowing this, there should be some regulation.

Do Your Own Research 

Multiple online platforms are available without subscription where you can find factual information on volume, performance, dividend, and 52-week high or low are available This is factual information and can’t be manipulated. Also, look at the direct competitor as that will give you a better understanding of the functioning of the company whose stock you are thinking of buying.

Beginners Must Strictly Avoid Future Options

These are not meant for small investors and that lure of huge returns has emptied pockets of money a small investors. So refrain from this. 

How to Pick a Stock?

We have said everything but not said a word about how to pick a stock. Save the best for the last, here it is. In the beginning, buy only a good quality A group stock as they abide by greater regulation and have better corporate governance standards. It is better if you are not buying a stock when it is closer to its 52-week high. They may be slow and static but they are solid insurance against upheaval in the market. When the market crashes these also fall but these don’t fall as much and second these stocks are the first ones to rise when the trend reverses.

Cheers to happy investing.

 

Disclaimer: The views and opinions expressed in the article are those of the author and do not reflect the views or positions of any entities or Everflipnews.com.

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