Ever Heard of Money Tree? Well, it’s possible when money can grow itself without you making another effort. When you can’t have a business started, you are able to invest your money in someone else’s business, the Company uses your money and provides you a Higher return.
The concept is called buying shares of a Company or having a Fraction of Ownership in the Company, thus You need to learn the Basics of How to Start Investing in the Stock Market as a Beginner, so you don’t waste money by investing in Random Companies.
What is Stock Market
In simple words, Stock Market is referred to be a platform where you can put your money on any company, If the company performs well in the future, you’ll be benefitted from your investments. With help of a Higher ROI, You can easily Tackle the Inflation rate too.
Do not Assume it is like Gambling System, instead, It’s a completely different Domain where you’re on an exchange platform designed to buy and sell shares of publicly-held companies. While you buy shares of a specific company, you own a tiny percentage of ownership in that company.
To Learn all the Important Basics and How to Start Investing in the Stock Market as a Beginner, you may refer to another article where you’ll learn about all the Useful terms used in the system.
Start as Early as Possible
Starting the journey of Investing at an early age is a great decision. Warren Buffett, One of the Greatest Investors of all time, has mentioned that His first investment at age Eleven was even too late to start.
Benefits of Starting Investments at Early Age:
- Power of Compounding: As you’re stating off early, You money is still invested for a longer time span, providing you a Higher Return with Compound Interest.
With Compound Interest, even a Small amount can grow large in a Longer Span of Time.
- Age Gap: Studies prove that younger investors have more risk-taking ability than a older person. As a teenager, even if you get into some Major trouble or make wrong deceisions while you’re learning to Invest, You still have years to Get your Financial career back on Track.
- Retire Early: If your dream is to Travel the world before getting into 50’s, You can achieve all your dreams by Starting to invest from your early 20’s, Instead of starting at your 30’s or Middle age.
- Develop Habit: Investing teaches to develop a habit of cutting of uncessary spendings & instead putting those expenses into Investments.
Types of Transaction
While you’re intending to get some output as a result of your Shares, You can either Invest the Money and Hold it for Years, or you can simply get the most out of it by Buying and Selling stocks on the same day. Let’s know more about these.
Long Term Investments means buying Stocks and Holding them for Months or Years before selling. Thus one can avoid short-term market fluctuations to generate a higher return.
- Easy to Manage: Simply buy and Hold for years, You do not have to Stick to the trading graph for hours and hours in a Day like you had to in Intraday Trading.
- Avoid Market Falls: In this Investment, Risks are very low comparatively. You can easily counter Market falls if You stick invested for a Longer Timespan.
- Earn Extra: Some Companies intend to provide Dividends as well as rewards to stock owners which might come in handy as an external source of Income.
- Automate Investment: You can automate the Process in Long term investing by Having a Systematic Investment Plan or SIP. This automatically transfers an amount set by yours from your Bank account to Demat account & puts them in a Specific stock or in a Bunch of Stocks.
Intraday Exchange is also known as ‘Trading’, It Means Buying and selling stocks within a day. The stocks in Trading are bought not to invest, but to earn profit by harnessing the positive fluctuations & movement of stock indices.
- Risks: Trading obviously has its own risks of Losing money as well as you can gain a lot from Intraday trading. It’s very important that to start Intraday trading one must be aware of all the concepts of the Stock market & be fluent in the basics of such trading to avoid losses.
- Suggestion: If you’re a beginner, we would always prefer to not get your hands on Trading, rather start investing for the long term which will positively benefit you in the Future.
Which Platform to Use
To start Investing all you need is a Demat Account, that can be opened via any platform with your necessary Documents like PAN, Aadhar & Bank Statements ( if you’re Indian ). You can choose among many platforms like Upstox, Angel Broking, Zerodha, and many more. You need to take care that you can access the Market system via both Websites and Smartphone App for ease.
We personally like using a Platform named ‘Groww‘, It’s easy to use, Intuitive, full of the Latest Features along with Analyzing capability where you can do more than enough digging of information related to any IPO/ Company.
With Groww App you can Get a ₹100 Signup bonus upon creation of a Demat Account, You’ll also learn the Basics to Start Investing in the Stock Market as a Beginner, the App is completely Beginner Friendly.
How your Money is Processed?
You might be wondering, where all the money from the Stock Market is going, is there any Organization managing everything or are they sent to Individual Companies. In order to Learn How to Start Investing in the Stock market as a Beginner, you need to learn the steps in which order gets executed.
Both Depositories maintain ownership records of financial securities, Like Shares of companies in Virtual Form. Demat Accounts are linked with the Depositories by Depository Participants. Securities and Exchange Board of India manages all functional systems.
- CDSL: Central Depository Services Ltd is the Depository for BSE India. One you bought shares, Bonds, or securities, these are accordingly debited or credited from the depository, and reflected in your demat account.
- NSDL: National Securities Depository Limited is Depository for NSE India.
Process of Purchase:
- Demat Account: A Demat account is for a Client who’s willing to Purchase share of a company, In a Demat Account, Shares of companies are hold. This create this type of Account you can go to either full service broker or discount broker.
There are numerous Discount Broker Platforms, as well as mobile applications that let you open a Free Demat Account quickly without any Paperwork. To create a Demat Account, Download the Groww App, and get your Tax ID (PAN) & Govt. ID (Adhaar) in handy, You might need them to verify your Identity.
- IPO: Initial Public Offering or IPO is the process of Enrolling a company in the share Market. When A company is allowded to have their IPO on live Market, they’re qualified to raise capital from public investors. People with Demat Account can Purchase their Company shares.
Who Manages the Market:
- BSE: Bombay Stock Exchange is the Oldest Stock Exchange in Asia, With more than 6000 IPOs listed, The Index used in BSE is known as SENSEX.
- NSE: National Stock Exchange is the Largest Stock Exchange Platform in India, With Latest and far more accurate technologies for which NSE has Higher Trading Volume than BSE. The Index used in NSE is Called NIFTY.
Index of Market:
To count the progress of the Market and track, Benchmarks are used respectively in NSE & BSE.
- NIFTY: National Stock Exchange Fifty includes Top performing 50 Companies in National Stock Exchange.
- SENSEX: It represents 30 of the largest and most well-capitalized stocks on the Bombay Stock Exchange.
In order to Generate Higher revenue, you need to start off investing right now, And if you’re a teenager, it’s the best time to land in the Investing world. No matter who you are, what field you work in, You should always invest your money and let them work to generate more money.
So, this was an article about ‘How to Start Investing in the Stock market as a Beginner’, I hope you liked it. Remember to follow along with all the Safety Procedures of Investing as a Beginner, Be consistent, keep investing, You’ll reach your dreams one day.
Apart from the Stock market, if you have heard of ‘Bitcoin‘ recently, These Cryptocurrencies have a high potential to generate a huge amount. Though the decentralized system does not provide any guarantee of your future investments at all. If you’re willing to know more about Crypto, Read the Article about What is the Future of CryptoCurrency.