Stock Market for beginners

Everything you should look for before diving into the market

Manuja Samant

2021-06-22 4 min read

Golden tips for Stock Market Beginners

Stock Market Research

The first thing to remember is that no one is fully aware of what is coming up next when it comes to share market. It is possible that people around you are discussing about the different shares in which they are trading or investing, the huge profits they have made, etc. while you are standing there wondering how do these people know so much? How have they become pro at it when I can't even understand basic fancy words of finance? Don't worry this happens to everyone. On day one everything will seem a herculean task but trust me as you progress on your journey, you will automatically start understanding the different terminologies even if you are not from a finance background.

The following are the golden rules for a share market beginner based on actual experience of people from non-finance background who have made wonders in the market-

1. Don't buy any script blindly on any tip! Do your own homework before buying-

This is the most important part of starting your investing journey which will save you from major troubles. You should NEVER trust anyone blindly and invest based on tips. Doing your own research is a must when it comes to investing. You are born alone and die alone in the world of stock market. People may give you a few calls which turn out to be right in order to gain your trust. And once they have fulfilled their motive, they will make profits by giving you the opposite call. And you will be in trouble big time! This was case one. The other case is nobody is perfect. Even if the other person is genuinely trying to help you with tips, it is possible that his or her research might be wrong because of human errors. So save yourself the trouble by doing thorough research before investing. Trust yourself and go for it!

2. As far as possible go for the stocks which are sectoral leaders-

Agreed that few penny stocks can become multi-baggers over time and you can buy huge quantities of such stocks with less capital as compared to top companies and market leaders. However, since you have just started, investing in stocks which bear a high risk is not advisable as in case you incur a loss it might demotivate you to invest further. The chances of capital being blocked are high when investing in risky companies. Market leader scripts are well established and known by common man, so even if the share prices drop, the recovery rate is high and you can come out in profit if you hold, as it is very rare for such companies to get delisted provided they are fundamentally strong. A few examples of market leaders are Infosys, TCS, Maruti Suzuki, Asian Paints, Reliance Industries Ltd., etc.

3. Never start with borrowed money-

This point will be argued upon by people from finance background by saying leveraging using debt can help you earn higher returns but hold on a second. I am not saying leveraging is not good, just that don't start with borrowed money to be on the safer side. No matter how much analysis is done, risk element cannot be eliminated when it comes to investing in share market. Somewhere or the other there is a mere possibility of the money being eroded. And if that money is borrowed money you will end up in trouble. So it is better to start with your own money first.

4. Remember not to put all money in a single script-

Always buy stocks from different sectors which helps to diversify your portfolio. Holding only one stock because you think it is the best stock available is increasing your risk. On the other hand if you invest in shares of different companies belonging to various sectors, it gives you the benefit of diversification and reduces your risk if the shares are chosen correctly.                                               For example, consider you liked an aviation stock in 2019 and went all in. Then there was a news of lockdown and airline operations  between and within countries  came to a halt. The share price collapsed leading to a great loss. Now if you would have divided the amount invested into different sectors say, Aviation, FMCG (Fast Moving Consumer Goods), IT, Pharma, etc. then the loss in one sector would have been overcome or balanced by the stocks belonging to other sectors. This way you would have come out in profit or at least the loss would have been minimized. Hence, no matter how tempting a share might seem, do not forget to allocate your funds wisely by creating a diversified portfolio.

5. Owning your decisions and never having a regret-

And last but very important, if you want to grow mature as an investor then be solely responsible for your decisions which may lead to profit or loss. Never blame others for your mistakes. Also the key to having a healthy mindset when it comes to trading or investing in the stock market is not having regrets. Many times you will hear people say, "I knew this share would go up, I had seen it at the bottom level, and was sure that it's price would increase! Damn I should have bought it." It is very easy to say this now that the event has occurred, but no one considers what would have happened if things worked the other way down and the price went down further. Making prophecies is easy when your own money is not invested. There are many who speak but only a few who gather the guts to trade. So do not make such regretful statements nor listen to others. Trust your instinct, give it your best and forget about the rest!