Business & Finance

What to Know Before Investing in Stocks

Why Investing in Stocks is Important?

As the people earn money, they want to invest it and that is important to make money from money and secure your future. In today’s time, where interest rates are quite low due to COVID uncertain situation, there is no point to park all your money into FDs rather you should look for investing in stocks as a part of your investment portfolio.

Investing in stocks in beneficial for you to grow in the long-term. You can take the help of market experts to know about the best stocks and companies to invest in. Also, there is lot of data available on internet about every company so you can do your research and invest accordingly to grow and become rich. It is advisable that you park some portion of your investment portfolio into stocks which you can do by monthly investment for a certain amount of money and in the long-term you will see that your portfolio has grown up exponentially.

How you can Invest in Stocks as a Beginner?

As a beginner you need a Demat account to invest into stocks. There are multiple options available to open a Demat account and start investing. Here are the different options below for you to start investing:                                        

Invest yourself without an expert (Hands-On Investing)

Under this strategy you will take all buying and selling decisions yourself without any expert. This means you must do your own research over the various stocks you want to invest in. You will be using your experience and knowledge to make buying and selling decisions. However, for this you need a broker who will allow you to use the Demat account. There are multiple platforms available to open Demat account. For e.g. Groww, Zerodha, Angel Broking, Edelweiss etc. 

It is advisable that you diversify your investing portfolio and not to invest in single stock. Diversifying your portfolio will help you in the situation where any stock is performing bad and that loss will be set off by the gains from other stocks.

Invest using an expert (Hands-Off Investing)

This approach is advised mostly to the beginners. Here you pay for the services of investment experts who help you pick the best-performing stocks or those that they think will perform well in the future based on their expert knowledge. However, this approach is little expensive as compared to Hands-On investing as these market experts could charge high commissions and percentages.

Things to remember while Invest in Stocks 

Risk

At the beginner level, it is important not to invest in bulk without having any experience. So, it is advised that you invest in small chunks at the inception and when your portfolio become wealthy with good returns you can start investing more. Hence, always consider how much risk you can bear.

Do your research

Before investing in any stock, do your proper research about the Company. There are various resources available to know about your target company. You must visit the Company’s website. Read their financial statements, past performance, profitability, revenue forecasts etc.

Dividends

If the Company, you invest in distribute regular dividends then it is considered as a worthy stock. Also, returns are an essential aspect to keep in mind during the purchasing process. So, always see the track record of dividend distribution for your target company.

Your Goals

Always consider what your goals are i.e. do you want to sell the stock in the short-term whenever you get good returns, or you want to hold the stock for long-term. The answer to this question will depend upon your risk bearing capacity and patience. If you have set the goals for long-term then don’t get distracted by the short-term returns because a good stock will create a great wealth for you in long-term.

Always be in the Market

Once you have entered the stock market, its important that you stay in and closely watch the market movements. This will give you heads on experience on how stock market behaves and reacts under every small and big situation. Also, keep your focus on the stocks you have invested in because it will help you to take your buying and selling decisions.

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