How to Start and What to Know About Stock Market Investing

How to Start Investing in the Stock Market

---

Key Points to Remember

Why Should You Invest?

• Plan for long-term objectives like purchasing a home or building wealth for retirement.
• Example: Save for your dream house over the next 10 years.

How Can You Make Money?

• Capital Growth:
  

  • Purchase a stock at $10 and sell it at $15 = $5 gain per share.

• Dividends:

  • Certain companies distribute profits.
  • If a business pays $1 per share annually and you own 20 shares, you earn $20 per year.

Understanding Risk

• Stock values can decrease. Only commit money that you’re willing to risk losing.
• Example: A stock bought at $50 might drop to $40.

The Golden Rule of Investing

• Diversify your portfolio to minimize risks.
• Example: Allocate funds across technology, healthcare, and energy stocks instead of relying on just one sector.

---

Steps to Begin

1. Set Your Objective

   • Clarify your reason and the amount you wish to invest.
   • Example: Save $100 monthly to accumulate $12,000 over 10 years.

2. Create an Investment Account

   • Use an online brokerage to trade stocks easily.
   • Example: Opt for a platform with low or no initial deposit requirements.

3. Start with Modest Investments

   • Begin with an amount you’re comfortable with.
   • Example: Invest $50 in a $25 stock or a fund that accepts smaller contributions.

4. Make Educated Decisions

   • Study a company’s background before purchasing its stocks.
   • Example: Select a reputable, stable business instead of a high-risk startup.

---

Dos and Don’ts of Investing

Dos

• Research Thoroughly
  • Example: Review a company’s performance over the past 5 years before making an investment.
• Invest Regularly
  • Example: Put in $25 each month regardless of market conditions.
• Be Patient
  • Example: If a stock declines from $30 to $25, hold onto it—it might rebound to $40.

Don’ts

• Avoid Selling in Panic
  • Example: If a stock you purchased at $50 drops to $45, resist the urge to sell. Prices often recover over time.
• Don’t Put All Your Money in One Stock
  • Example: Avoid investing $500 in a single company. Spread your investments to reduce risk.
• Ignore Unverified Advice
  • Example: Don’t act on a friend’s claim that a stock will “double in value within a week.”

---

Key Stock Market Terms

• Stock/Share:

  • A portion of ownership in a company.
  • Example: Buying one share at $20 makes you part-owner of the business.

• Dividends:

  • Company earnings shared with investors.
  • Example: If a business pays $1 per share yearly and you own 10 shares, you receive $10 annually.

• Portfolio:

  • The total collection of your investments.
  • Example: Holding stocks in technology, energy, and retail creates a diversified portfolio.

• Volatility:

  • Rapid price changes in stocks.
  • Example: A stock might cost $100 today, drop to $95 tomorrow, and rise to $105 the next day.

---

Beginner’s Investment Plan

• Save $100
  • Example: Skip two restaurant meals a month to allocate funds for investment.
• Open an Investment Account
  • Example: Choose a platform that supports small starting amounts.
• Diversify Your Investments
  • Example: Buy one energy stock for $30, one tech stock for $50, and one healthcare stock for $20.
• Invest Regularly
  • Example: Add $10 monthly to purchase more shares.
• Track Your Progress
  • Example: A $100 investment can grow to $120 in a year with a 20% increase in stock value.

---

Final Advice

• Start Small
  • Example: Begin with $50 to learn about the market.
• Stay Consistent
  • Example: Keep investing $25 each month, even during downturns.
• Focus on Long-Term Goals
• Example: A $500 investment today could grow to $1,500 in 10 years with consistent returns.

If you’re from India, don’t miss this detailed post about the top 4 stock brokers, their charges, and everything you need to know to make the right choice- Which is the Best Stock Broker in India? Groww vs Zerodha vs Angel One vs Upstox Compared