Beginner’s guide to invest in the Share Market

Are you a beginner in investing in share market?

‘Beginner’s guide to invest in the Share Market’  is for beginners who want to invest in share market for the first time. We will help you prepare and help  analyze if you are ready to invest in shares. We will talk about what to do before you invest in shares, and what to do while you are invested. We will talk about actions you should take before investing in NSE or BSE. We will also discuss about greed, fear and human emotions, and how they impact the stock market.

It is very likely that you have been thinking about investing in the stock market for a while now. Let’s talk about your motivation to invest. Is it because –

  • The market is doing very well.
  • If you don’t invest in stocks, you are afraid you will miss the bus?
  • Somebody you know made a killing? Why not you too?

If you answered yes to any of these questions, see how greed and fear have motivated you.

If you answered any of these –

  • I have reduced my debt to a manageable level
  • I have some extra cash and can take some risks
  • I have taught myself the basics, and am ready to jump in

If you answered any of these, you have taken a rational decision.

Next consider the following before buying any new shares –

  1. How long can you hold those shares?
  2. How much of your original investment can you afford to lose?
  3. Will you be able to sleep peacefully after buying those shares?

Investment in shares returns an averages around 15% over a long period of 10-20 years. However, the return over a shorter duration can be very volatile. For a duration of say one day, the return can be between -5 and 5%. For a duration of 1 year, the return can be between -30% and 30%. These gyrations in the return smooth out to about 15% over a long period of time. Hence understanding how long you intend to hold on the stock will help you understand the potential downside risks.

Second point is closely related to the first one. If you plan on holding the shares for only 6 months, and you don’t want to lose more than 10% of your investment, shares may not be the right choice of investment.

And lastly, if you are going to lose your peace of mind by investing in shares, investing in the stock market may not be for you.

Once you decide to move forwards, you will have to open an account with a broker like Edelweiss or ICICIDirect.


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