Investing in the stock market is a common trend. Many people think that they need to have a lump sum amount to invest. Many new people do not begin their careers as early as they could have, for this amount.
Now, people may start a career in the stock market with as little as Rs 100-500. They may reap benefits in the stock market with such a trifling sum. You can get to know more about this at trading.info.
Stock market is a broad industry which basically depends on probabilities and chances. While the chances of earning from it is high, the chances of losing out on your earnings is also quite easy if you are not aware of the proper steps to follow in order to trade in the stock market. One has to keep a few factors in mind to invest in here, even if you are starting with little money. Now, let us find out what the factors are:
• Understanding the profile of the investor:
To understand his profile, the investor needs to focus on three aspects:
a) Clearness about financial goals
b) Assessing the risk tolerance
c) calculating the horizon of investment
Let us understand these points:
• Clarity about financial Goals:
An investor may have several goals in mind while saving. The goals may be buying a home within a few years, investing in the child’s education, or having some amount handy after retirement.
It becomes easier for the investor to define his timeline based on his goals. It will also help him understand what type of returns he needs.
• Assessing risk tolerance:
When the person selects the proper type of investment, he may be able to assess his risk tolerance. The different types of risk include:
• High risk
• Moderate high risk
• Moderate-low risk
• Low risk
• Calculating the horizon of investing:
At a point in time, the shares yield good risk for a period between 7-10 years, according to the investment a person makes. Then, the investor is in a better position to select shares that may yield good returns.
• Understanding the fundamentals:
A beginner needs to understand the fundamentals of how stock markets work. It is also important to know the factors influencing the performance of stocks before investing.
• Concentrate of Savings:
The process of saving money is very easy. Saving even Rs 1000 per month helps us invest a hefty sum later. People need to create a budget for household expenses. The realistic amount they will be able to save should feature in the budget.
• Begin Slowly:
A person who wants to invest in shares initially should do thorough research. He or she is not required to invest a hefty sum at one go. In the beginning, he or she should look for shares within the budget. Then, it becomes easier to find suitable options. As the savings gradually increase, the investor understands more about the market. Then, he or she will be able to have a choice of stocks according to the investor profile. The proverb ” Slow and steady wins the race” is applicable here.
• Be careful of penny stocks:
Many people are curious to know what penny stocks are. For their knowledge, shares that are available for Rs 10 or less are known as penny stocks. The stocks are available at such a low price because they are on the verge of going bankrupt. It may also be because there is a low demand for them. This is why they are potentially high-risk shares. It is wise of the investor to consider the risks before investing in them. Many beginners feel it is easier to invest in them because of such a low price. But, there are high chances of losing their shares.
• Invest the extra amount carefully:
It is important to make a smart decision. Smart decisions always pay off. Even if a company is strong, investing at the wrong time in the wrong place may have adverse effects. So, even if an investor has extra funds, he should not invest hastily.
• Do not decide under the influence of emotions:
Many investors suffer losses because they get carried away by emotions while buying or selling stocks. Hence, it is always a wise idea to take a decision neutrally. An investor who can make decisions without getting carried away emotionally assesses the situation. Then, he redeems the stocks that are not strong.
On the other hand, he holds on to premium quality stocks.
• Avoid Rigidity:
It is important to diversify as much as possible. Many beginners feel that only those who are experienced in the stock market may diversify. However, it is wise for even beginners to diversify. A person who has invested his stocks in different stocks doesn’t risk losing all his shares if one stock collapses.
• Try out Plans for systematic Investments:
Systematic investment plans are also known as SIPS. Quite a few mutual funds offer it. It is especially popular with beginners. Many people reproduce the method applied by SIPS for creating their SIPS. Here, they may directly invest their stocks. Beginners go in for it because they are free to invest even an amount of Rs 500 in equity funds. This way, the stock market is revealed to the beginners. Also, they are individually not required to invest in high priced stocks.
The stock market is not a place for emotional people. People need to be level-headed and calm in this industry. It is easy to be swayed by the portfolio of celebrity investors. However, a wise beginner always keeps in mind that such celebrity investors never share the reasons behind their success. This warning Is intended for beginners who blindly imitate the celebrity investors. Celebrity investors do not divulge the exact reasons behind their success.
Also, a wise beginner always takes informed decisions. He or she invests funds into stocks that do not have a higher chance of collapsing. It is better to take the advice provided by successful people online with a pinch of salt.