Learn About Stock Markets

The investment world is so fascinating that you may be overwhelmed at first by the huge investment opportunities. With the increased usage of the internet, you can learn about stock markets within the comfort of your home. As beginners, we are always looking for new ways to get rich quickly in the stock market and simply copy what others do. However, investing isn’t just about getting rich; it’s about creating wealth for the future. If you are new to the markets, you must first learn the basics and then start investing.

Here are some best tips to start your journey in stock markets:

1. Open a demat account:

For a beginner, the first and most important step in learning stock investing is to open a demat account. You must first open a demat account to trade in the Indian stock market. A Demat account helps you to hold your stocks in an electronic format. They hold all your investments like shares, mutual funds, government securities, and bonds, in a single place.

2. Determine your investment objectives:

The first step in choosing investments is determining your portfolio’s goal. When it comes to investing, everyone wants to get rich. Investors may be more concerned with generating an income supplement during retirement, preserving their wealth, or capital appreciation. Traders look for quick gains and various price patterns.  So, your objectives will determine which companies you seek to acquire.

3. Start reading books:

There are thousands of books available in the market about stock markets. Grab a one and start reading. Choose a book for a novice and make sure the language is simple. The best part about book reading is you learn about stock markets from scratch with a very minimal investment. Some of the top books you can read as a beginner are:

  • One Up on Wall Street by Peter Lynch
  • Let’s Talk Money by Monika Halan
  • Rich Dad Poor Dad by Robert T Kiyosaki
  • The Intelligent Investor by Benjamin Graham
  • Common Stocks and Uncommon Profits by Philip Fisher
  • The Little Book of Common Sense Investing by Jack Bogle

4. Choose a type of investment:

You have multiple options available to invest your money. Start understanding each investment and the risks associated with it. Some of the key financial instruments traded in the stock market are:

  • Equity/Shares: It represents your partial ownership in the company, in which you are entitled to receive the profits of the company. Equity has higher liquidity which means you can easily sell your shares in the market.
  • Mutual funds: It is like a trust, collecting funds from a group of investors who share a common goal. These funds are now invested in various other securities like stocks, bonds, etc., which are managed by an expert known as a fund manager.
  • Bonds: These are fixed-income debt instruments issued by Government and large companies to raise funds. When you buy a bond, that means you are lending money to the bond issuer, and in return, you will get the pre-decided regular interest. Once the bond reaches its maturity date, you’ll receive your money back.
  • Derivatives: These are the financial instruments whose value is derived from an underlying asset such as currencies, stocks, interest rates, and so on. Futures and options are the two most common derivatives contracts.

5. Read articles:

There are numerous articles written about stock markets, which is an excellent way to get information about the markets. You should make a habit to read at least one article daily and get some important insights from it. You can also set Google alerts for some well-known writers, so you don’t miss out on any topic.

You can watch videos of some notable stock market personalities like Warren Buffett, and get knowledge from the experiences they offer.

6. Find a mentor:

Look for a mentor who is experienced and knows in and out about the stock markets. They will provide you with the right guidance and several resources to make you learn. Beware of the people who claim themselves as experts but in reality, have zero practical exposure to stock markets. Therefore, select someone with expertise; additionally, choosing someone with relevant certification in stock markets would be advantageous.

7. Follow the stock market:

To learn about the recent trends in stock markets, you must watch TV shows and news channels. They will help you learn about what is happening in the markets and also you can get a rough idea of when and where to invest. Just listen to them daily for 15-30 minutes and you can learn about stock prices, oil prices, economic changes, etc. Some good channels you can start watching are CNBC, ET Now, and Bloomberg.

8. Take online courses:

Invest in some good online courses, workshops, or seminars conducted by professionals. These classes will be educational and will provide you with a comprehensive understanding of how the stock market operates. Not all seminars or classes are worthwhile. Many online classes will run a massive promotion campaign and may not be worth your time. So, read reviews and ratings about the courses, speakers, or the academy before choosing.

9. Start researching stocks:

Start taking notice of the businesses around you. For example, in your daily life, you use products like toothpaste, soap, clothes, watches, and so on. Look for a company behind every product you use and start researching about them. If you like a company’s product or service, look into its parent company to learn more about it, such as whether it is listed on the stock exchange, what its current share price is, and so on.

To research a company’s stock, you must read its financial statement. Understanding and interpreting a company’s financials is the most important aspect of buying a stock. The company’s financial statement includes:

  • Balance Sheet- which consists of assets and liabilities.
  • Profit & Loss (P&L Account)- contains income and expenses of the existing year.
  • Cash Flow Statement- shows the inflows and outflows of cash.

10. Start small:

The best experience you can get of the stock market is by investing in it. You don’t need to invest a big amount, just buy a few shares in small quantities. By doing this, you will learn about how to buy and sell, and how the stock markets work. With small trades, you will learn from your mistakes and understand how much risk you can tolerate. As a beginner, start with large-cap stocks because they are safe and liquid, and then progress to mid-cap and small-cap stocks once you have gained some experience.

You can also use some virtual trading platforms to get that confidence before actually investing. Virtual trading is a way to learn about buying and selling of a stock without using real money.

Bottom line

You now know how to begin your stock market journey; all you have to do is give it a push and begin investing. Do not make a purchase solely on rumors or the popularity of the firm. Do not buy a stock just because someone else made a lot of money from it. Pick out some well-known companies’ stocks, and research them with the help of fundamental and technical analysis. A disciplined approach and continuous learning will make you master the stock markets.

Happy learning!

by Instockbroker Team | January 5, 2024

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