You want to start buying shares and investing in stocks, but you’re still unsure where to start. Do you want to start stock market investing, but don’t know how to? Don’t worry; we’re here to help! The stock market can be a confusing place, and it’s completely normal to feel lost when you’re just beginning.
However, this guide is specifically designed to help you fully understand the online stock trading industry and begin with your first investment. Let’s first understand what a stock is.
What is a Stock?
A stock can easily be understood as a small piece of ownership in a company. When you buy a stock in a company, you are buying a small, tiny fraction of that company. So, whenever you buy shares online, keep in mind that you will be buying a small portion of that company. A company mainly rolls out stocks to raise capital for its operations.
When you invest in a share, you naturally become the investor and get returns in the form of:
- Dividends: The company shares its profit with the investor through regular payments known as Dividends.
- Capital Appreciation: The value of the stock you’ve purchased increases over time, and then you can sell it at a higher price than what you bought it at.
Before you start the journey of online stock trading, you should follow the following steps to ensure a doubt-free trading experience:
- Set up a brokerage account: This will be your investment account that allows you to sell and buy stocks and other securities. Think of it as the account from which the money you invest in online stock trading will be deducted. If you sell a share at any price, the amount will be credited to this brokerage account.
- Be financially prepared: Since this is the first time you’ll buy shares online, you need to have a solid financial foundation. Make sure you have a safety fund that covers your basic living expenses for at least three to six months.
- Define your investment goals: Decide whether you are planning to invest for the short term or the long term. Also, make sure you define your aims for this investment.
- Assess your risk tolerance level: This is the level of risk that you’re willing to take. Decide the percentage of investment you are willing to lose and invest in the stocks accordingly.
Types of Investments for Beginners
Apart from shares and stocks, there are different types of stock market investing that you can do as a first-timer:
- ETFs (Exchange Traded Funds): ETFs can be understood as a combination of assets, including stocks, bonds, etc. By investing in this, you can easily invest in multiple companies at the same time. This is also an easy process to buy shares online.
- Mutual Funds: Mutual funds are the most secure type of stock market investing. They are professionally managed and collect money from various investors, which is then used to purchase securities.
These are the simplest steps that you can take before starting your share market investment journey. If it still gets overwhelming for you, then start by downloading a trusted share market trading app. The Indian stock market is a large pool of investment. Investing in this can be a tricky business to do, but these simple steps will take you a long way.