Starting your Investing Journey
We’ve all felt out of place on one occasion or the other, you might feel it too while starting your investing journey. Yes, you are missing something amazing if you aren’t following stock market.
You must be scratching your head on hearing terms like ‘nifty50’ or ‘blue chip stocks’ but we are here to fix that.
First let’s know what are shares?
In simple words, Shares are a way to own a part of the company’s value.
Let’s say, there are 10000 shares of a company ‘oranz beverages’ and you buy 100 of them. So you’ll be the owner of 1% of ‘oranz beverages’.
Shares are also known by other names like stock, equity, scrips or ticker.
After knowing shares, you must have to be familiar with what is nifty or sensex?
There are two stock market exchanges in India namely NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Any company which wants it’s shares to be traded and be put for public issue has to be listed in either one or both of the stock exchanges.
Nifty50 is the list or index of top 50 companies listed in NSE(National Stock Exchange) and Sensex is the list of top 30 companies listed in BSE(Bombay Stock Exchange) based on market capitalization.
Now you must be wondering what is market capitalization, let’s know about it.
Market capitalization is the most effective way to evaluate a company.
Market capitalization= total number of shares × price of a share
Let’s take an example, say price of 1 share of oranz beverages is 1000rs and the total no. of shares are 10000.
Therefore the market cap of oranz beverages is 10000 X 1000= ₹1 crore
Now you must learn how to earn from stock market
The most obvious way of making money is buying a stock at low price and selling it at higher price.
Considering the 100 shares of oranz beverages we Bought at ₹1000 are now worth ₹1200 after 2 months. By selling it we get capital gain of (1200-1000)*100= ₹20,000
Now, There are two types of people in the equity market-
•Stock Investors ;and
•Stock Traders
Stock investors are those people who buy stocks for long term gains, sometimes for many years, even decades. The goal of investors is to build wealth over a period of time.
Stock traders are those people who buy stocks for short term gains ranging from 1 day to a few months. Their prime focus is on the price of the stock and not it’s underlying value.
After all this knowledge, you must be wondering how to get started
Firstly, you’ll need a demat account. Many discount brokers have popped up in recent times. Some good brokers are zerodha, upstox, groww etc.
The stock market is open from 9.15AM to 3.30PM from Monday to Friday. These are some important and frequent terms to know while entering the market-
Bull- Bull is an investor who thinks the market or a sector or a stock will rise in price over time
Bear- Bear is an investor who thinks that a particular stock or the market will fall over time.
Blue Chip Stock- These are large companies which are financially sound and have market capitalization of thousands of crores. For eg- Hindustan Unilever, TCS, HDFC Bank
Dividend- A sum of money paid by the company to it’s shareholder on a quarterly or an annual basis is called dividend. All companies do not give dividend. Some high dividend yielding stocks are ITC, Indian oil, castrol.
52 week high- 52 week high refers to the highest price at which a stock has traded in a 52 week period i.e. one year.
Portfolio- Portfolio is a collection of investments owned by an investor.
Volume- Volume is the number of stocks traded in a given time frame, usually measured for one day.
While stock market can make you huge money, it involves high risks and investments must be made with know-how and knowledge. So here are few important tips before you get started-
Stay away from stock market tips- it could be WhatsApp forwards, telegram channels, twitter handles or your that one friend who trades in the market. Do your own research and do not rely on second hand information.
Penny stocks, A big NO-NO- Penny stocks are basically stocks which are worth ₹10 or less. Yes, your friend may have made a few bucks from such shares but in the end the probability of these stocks being a success is very little.
Don’t trade on the basis of news- If you come across a news which is very positive for a company, the big players have known it much before than you. The price of that stock will have already factored in such news.
Start with a small capital- If you incur a substantial loss in the beginning of your investing journey, your whole path will be focused on making up for that loss.
I, the author would like to share my personal experience that I started with 10k capital and put in few thousand rupees every month until I was confident about my investing knowledge.
So, investments must be done carefully and learning must go on throughout your journey in the market, as experience in the market matters a lot.