Introduction
In this article, I will share a detailed review of the stock market for beginners
People say if the base is good, then the quality of the building is also better, So friends, I am here to help you make a strong base in your stock market learning. And I am sure that this will help you earn so much that you will have your number of buildings.
So in this article, I will share what the stock market is and how to learn to invest.
Stock Market For Beginners
Beginners in the stock market fear the most as they have seen in the movies that everything has been ruined because of the stock market, but they also see their friends earning hefty amounts from it. Also, family members encourage them to stay away from the market.
Even if you have studied commerce in school or colleges, you don’t know about the stock market as they don’t teach the share market there either.
All this creates a lot of confusion; I am sure that all your confusion and worries will go after this article. ANd you will be aware enough to understand where to invest and how.
Let’s start with some magical incident happened in the past which has changed many people life.
Suppose you invested Rs 10000 in Wipro 40 years ago, then it would have given you Rs 7000 cr. Even if someone has invested only Rs 1000, then also he would have received Rs 70 cr, and yes, If Rs 100 has been supported in Wipro, then you would have received Rs 7 cr.
So this is the potential of the Stock market, but I would urge you this is one of the stories as there are other stories as well exactly opposite where people have lost their money entirely.
This means if someone has invested Rs 700 cr, then it would have converted to Rs 10000.
So this market can make or break you depending upon your strategy.
But I am there to reduce your losses and increase your profits. Let’s take some common questions which every beginner has initially. Below are set of questions that I have answered in this article:
- Is Stock Market Risky?
- How much return can I expect?
- How much should I start with?
- What is the process in the stock market?
- Why Stock market has a bad name?
- Can I invest without any commerce knowledge?
- How does the Stock market work?
- Where do I learn about the Stock market?
Let’s start with the first question:
Is the Stock market Risky?
Well, the Answer to this question is entirely subjective. Let me ask a straightforward question too. Whenever we buy stock of any company, we purchase minimal ownership of this company. That’s why the name is share. You are becoming a co-owner of this company. Now you tell me, let’s suppose you invest in your friend’s or family members’ business. If the business fails, then you will lose your money.
The same happens when you invest in other companies like TATA ADITYA BIRLA GODREJ etc., while buying shares. If these companies fail, then your money will also be lost. And if these companies grow, then your money will also increase.
The analogy is the same when you invest in a friend’s business; you have that trust that if the company grows, your money will grow else otherwise.
You will not get any interest in the business. Similarly, in the stock market also you will not receive any claim as this is not a deposit or loan.
Many companies are getting bankrupt and giving heavy losses to their investor.
But companies like Eicher motors are giving phenomenal returns in the last 6-7 years. In the last few years, the sale of Bullet bike roses multi-folds and share prices. There are so many examples like this TVS is one of them. In the last ten years, it shares roses almost ten times.
There are so many shares that have given 5-6 time returns. But yes, there are risk factors associated with it, but that is why we are getting better returns. And yes, as far as the risk mitigations or lowering the risk is a concern, I will surely help in that.
Let’s solve the second question:
How much return can I expect?
To answer this, we have the same example as used above: suppose you have invested in your friend s business, then how much profit you will get next year can be 10% or 20% or 30%, or maybe we can incur losses as well.
There are no fixed criteria for it. There are many shares where price does not increase for years, and on the other hand, some of it doubles or triples. This is about one share, so whenever you are investing, you will invest in a portfolio of 10-12 shares.
We will ensure that even if 1-2 companies fail to return, the rest will help give us a profitable return. So if you have invested in 10-12 good companies, then in growing countries like India, in the long run, minimum of five years, you can get a return of 18-20%, which is three times more than FD and two times than gold.
There are so many successful investors worldwide that they are getting a 30 % return year on year.
Let’s answer one of the most exciting questions
How much should I start with?
One of the most critical aspects of the stock market is not how much you can invest, but where you are investing means what type of share you are investing and how consistent the return is.
Let’s start with a simple example; for instance, let’s suppose we start investing Rs 1000 every month and keep increasing it by 15% every year. So with 1st year, you will invest 12000 next year you will invest 13800.
Year 1: 1000*12=12000
Year 2: 1150*12=13800
and so on till next 25 years and this investment will become Rs 1 Crore. What is the key to this investment?
- you have to invest 1000 and increase 15% every year
- For the next 25 years
- And your investment should yield 15%.
All this you can calculate easily by using different SIP calculators available.
What is the process to start this business:
The process to start investing in the share market is extremely simple. You require three documents:
- Aadhar card
- PAN card
- Bank Account
If you have all the documents, open an account with any discount broker like Zerodha, upstox, etc. Why do they call a discount broker because They take significantly less commission? I have an account with ZERODHA.
You can also open an account in Zerodha. Within 3-4 days, your report will get open, and yes, it doesn’t take brokerage or commission if you invest in the stock market for some time. It will only take a commission if you do Intraday.
Why Stock market has a bad name?
If everything is good about this market, then why does the Stock market have a terrible name? Why do people fear investing in the stock market?
There is a straightforward reason behind it. Let me make you understand in the external world if someone buys a bar of gold or a piece of land; then, in that case, we will not think of selling this gold or land in the next 3-6 months.
They always consider these assets as long-term investments. But when it comes to stocks, they think of it as a quick rich scheme and treat it as a short-term investment. And that’s where things go wrong. We have to treat the stock market as a long-term investment.
You can get rich overnight by gambling or lottery and even know the actual probabilities of these businesses.
When investing in a business, you need to study everything about that company, like its profit loss statement, revenue generation, future goals, and company vision. I would highly recommend that you never invest in the stock market because someone has advised or seen some charts in which you don’t have any proper knowledge.
People invest in some penny stocks and think that even if the price moves a bit that will get excellent returns. It will help if you manage your expectations of ROI between 18-20%. This will help to double your money in 4 years.
If I compare the same with FD’s, double your money takes around 12-13 years. That means Stocks can give a reasonable three times more return than FD’s.
Can I invest without any commerce knowledge?
The next question would be that either you studied engineering or arts and have not studied anything about commerce either even then you invest in stocks, isn’t this good news. Your educational background doesn’t matter in investing.
Let me share a fascinating story related to this. A few years back in the United States, there was a survey done in which there were a group of class 5 standard children, and on the other hand, there was CA.
Both groups were asked to choose a basket of 8-10 stocks. We know CA is the most learned person in the commerce fraternity. In comparison, children aged ten years a no match for them.
The result came after five years in which stocks chosen by students performs exceptionally well. Now you must be wondering how that happens; Answer is simple children have chosen stocks like Cadbury Barbey Disney etc., and CA, who have selected stocks after doing research, hasn’t performed that well.
With this study, we can say that if class 5 standard students who know Hindi English and science can compete in CA, we can.
Let’s take one more example; we know those female doctors are considered better investors even though they don’t have financial knowledge. There are two specific reasons behind it :
- They pick stocks a per their general knowledge, which means product that is doing good.
- They are so busy in their daily routine that they don’t go through rigorous research, and because they are very busy at times, they invest and forget, which eventually helps them compound their investments.
Now let’s talk about the two most essential aspects of the stock market.
- Why stock prices fluctuate daily and how to predict which stock will go up and which will go down.
- What should be your learning curve
How does the Stock market work?
Now let’s understand the share market concept. And why there is a fluctuation in pricing.
Suppose you want to start a business and require Rs 5 lacs, then this can be owed by family relatives or friends, but if you need 1000 cr, then no friends, family, or even bank can give you such a loan unless you are from a billionaire family.
So we can get this from the public, you need to present your facts in the form of a presentation, e.g., that you are coming up with an electric car, Something unique in the market. After this, if people trust your company and your idea, they will give you money, and in return, you have to provide them with shares of the company.
Now in case, let’s suppose the investor wants some urgent money if he wants to sell, then they cannot sell to the company as that money has already been invested in other works.
For this, we have a market where the investor can sell his share to other interested buyers. And this market is called as share market. In this market, we can sell or buy shares of more than 4000 listed companies.
If you think Colgate will do better than you can, but its share, you can sell it. The fact is that there are millions of people buying and selling shares, which is why you get the availability of any shares.
This is why the Share market is so critical for investment. Just imagine you have the opportunity to invest in companies like TATA RELIANCE GODREJ etc. With a click of a button, you are getting a chance to become a proud partner of such awesome companies.
Where do I learn about the Stock market?
I am sure you must have received some fantastic ideas till now. If not, please subscribe to my blog, and I assure you that you will be getting detailed articles related to stocks, mutual funds, etc.
Meanwhile, please go through the below links, and also if you want to buy my recommended books on investment then please go below-recommended book.
How To Invest In Stock Market In India – FINANCE-BHARAT (financebharat.in)
What are Mutual Funds | Different types of Mutual Funds – FINANCE-BHARAT (financebharat.in)
