How Do You Invest in Stocks for the First Time?

You finished your academics, and now having a comfortable but struggling job, and have little extra funds and are planning to save for your car or a home or started building for an adequate retirement fund.

How Do You Invest in Stocks for the First Time

When looking for investments for your dream car or house or anything, one has too many options and young people often get confused, where to begin and how to begin, because some investments are often too complex and difficult to understand.

If you have decided to invest in stock market, there are certain things that you should keep in mind

 

  1. Learn about investing

To learn more and more about investing best friend is reading and knowledge gaining. There are numerous books, magazines, periodicals which are focused on the share market. There are books available written by distinguished authors. Articles also appear in business newspapers and magazines.

You can also ask for advice from successful traders. Their view, opinion, their calculations, and observations. Gaining knowledge is the best form of protecting your hard earned money. There are benefits of intraday trading.

 

  1. Opening account with established brokerage firm

Open trading and demat account with brokerage firms which have vast experience. They offer trading tools like candlestick analysis, stock screeners etc. so that you can filter out good stocks form not well-performing stocks. The fundamental and technical analysis also helps you in segregating good, better and best stocks. Brokers get company news much before it spreads inthe market, which gives you an added advantage. Better take an overview of Indian stock market before opening an account.

 

  1. Control your emotions

One should think of gain/loss in stocks from a logical point of view and not from an emotional point. It is your business and should be respected and treated as one, emotions should be kept on the backburner. There are many traders who cannot control greed. They expect that the share prices, which they hold, to keep on rising forever which in reality is impossible. One should not stick unnecessarily to shares which are non or underperforming. You can make money in Indian stock market provided you “play” with brain and not the heart.

 

  1. Certified financial planner

Do not take your investments decisions from any Tom Dick and Harry. They can be anyone who has the least knowledge about share market dynamics. They can be your friends, family member or anyone. Remember it is your hard earned money and you cannot afford it to jeopardize your investment plan. And later tell you “I told you . . . . “  and wash his hands off. Better take help of a certified financial planner, who knows when to enter and exit the market. Which shares to hold, which to buy, which to sell depending on market conditions? You can also join best share market training institute and gain knowledge.

 

  1. Investment amount

This is one of the most important decisions to take. How much amount one is having as surplus and how much to invest? You should keep a certain amount for unforeseen future needs. If you don’t plan properly then when some funds are needed for the emergency purpose, you may have to sell shares, for a loss, if the market is in correction mode at that time, and you intended to hold it for a longer period. Stock market investment tips can be had from reputed and registered firms with SEBI on the official website.

Is it profitable to invest in shares?

Just like any other market, say a vegetable market or fruit market, a financial market is a place where buyer and seller meet to enter into a securities transaction. The place where this exchange of share takes place is called stock exchange.

There are many stock exchanges in the world. They are located in the major financial center in the world. Like New York, London, Tokyo, Shanghai, Mumbai, Hong Kong, etc. Companies have to list themselves on the stock exchange so that their shares can be traded. Also, see an overview of Indian stock market for a better idea.

Is it profitable to invest in shares

 

Shares are bought/sold through firms who are called stock brokers. These stock brokers charge a fee for the services that they give. They are full-service brokers and discount brokers.

  1. Variety of stocks

One can invest in the stock market by either selling/purchasing by oneself (benefits of intraday trading) or by investing in mutual funds (or fund company). By investing through oneself, one has to pay only brokerage charges. By investing in the mutual fund, charges for managing fund are automatically deducted.

By investing through the mutual fund (MF) the fund manager invests in a number of stocks on your behalf, diversifying in different equities so as to reduce the risk, better return on investment and keeping day to day watch on the market.

  1. Investment companies

The risk is always involved while investing. Be it banks, equity or whatever. Though the degree varies and so do the returns. Investors should balance risk and rewards before investment. Here your risk-taking capabilities come into play. Some investors are risk lovers and some are risk averse. One should know when to sell shares to make a profit.

Hence it is critical to choose the right company to invest in. To reduce risk, one should select such a company that has good cash flow, good saleable product range (present and future) and has large enough market capitalization (mostly blue chips and mid-caps), good and proven management (board of directors).

If you are investing in equity through mutual fund route, see to it which sectors they are investing in. Broader the sectors better but not too broad. As broader sector tend to be less volatile in terms of returns.

  1. Mix portfolio

Equity investments have the tax advantage as there is no capital gain tax if equity is held for more than one year and dividends are taxed at a much lower rate as compared to interest income. Dividends are not too regular as interest. Hence one should have an investment which is a mix of equities and fixed income.

Depending on your risk tolerance factor (both emotionally and financially) one should choose accordingly. If you are a risk lover than you can have more of equities and less of interest income component. And if you are risk averse the opposite is true.

  1. Time period of investment

As far as equity investments are concerned, to get better returns one has to stay invested for a considerable period of time to get better returns and one has to make certain adjustments depending on market conditions as and when needed. No need to time the market when they are high or low, that is how to make money in Indian stock market.

From available data, one can see that for long-term investments, the equity market has given better returns compared to interest paying investments. Bank interests are unable to beat inflation as everybody knows inflation rate is moving more ahead of interest rates year on year basis. There are many myths and facts about Indian stock market which should be cleared before investing.

How are full service brokers and discount brokers different?

When we have to sell/buy stocks we need a broker. He is the link between stock exchange and investor/trader. Most of the investors and few traders are confused which retail broker’s services they should take full-service brokers or discount brokers in context of an overview of Indian stock market.

How are full service brokers and discount brokers different

Let us analyze both types of retail brokers on various parameters and try to figure which services suit best.

FULL-SERVICE BROKER

Personalize Local Services – They have a good network of branches and franchise set up across India. They offer personalized services to their clients. Clients can visit them at their branches and franchise

Must Read: How to choose the right stock broker?

Number of Retail Brokers – There are more than 10,000 retail brokers in India. Nearly 500 or so have scaled down their operation because of stiff competition from discount brokers.

Add-on Services – They provide many add-on services like margin money, research reports, taxations, advising, and much more.

Account type – For transaction without hic-cups they offer 3 – in – 1 services like a bank account, trading account, and demat account.

Brokerage Charges – Many charges on basis of percentage of trade total trade volume. There is not much transparency as far as terms of charges are concerned, and are negotiable. The pre-paid plan is offered by some brokers.

AMC – Many a brokerage have annual maintenance charge.

Brokerage charges – They charge minimum brokerage.

Call & trade – It is free with most brokers.

Must Read: How to select the best share broker in India?

Penny stock trading – Since they charge minimum brokerage, hence expensive.

Software charges – For using trading terminal most of the brokers charge extra to the retail investor.

Funding – Many of the broker offer funds for trading.

Margin money – Based on the personal relationship with the client they offer higher margin.

Investment options – They have many options like IPO’s, shares, commodities, forex, MF, FD’s, bonds insurance etc. Virtually in all area of the security business.

Target customers – Their main clients are those who need help on stock tips, diversification of portfolios for right asset allocation, managing their portfolio etc.

Focus – Because on the stiff competition they are focusing more on advisory services.

Examples – SBICAP Securities, ICICI Securities, HDFC Securities, Kotak Securities, Angel Broking, India Infoline, Motilal Oswal, IIFL, Sharekhan, Bonanza, Bajaj Capital, India bulls, SMC Global Securities, etc.

 

DISCOUNT BROKERS

Personalize Local Services – Very few or no branches or franchise and that too mostly in metros. They are mostly online brokers. Do not offer personalized services. No frills brokers.

Number of Retail Brokers – Since this is a virtually new type of brokers who started their operations in 2010 they are very less in numbers. But being less in numbers they account for nearly 10-15 percent of the transaction.

Add-on Services – They do not offer research, funding, taxation, advising. No frills services. They are mostly focused on benefits of intraday trading.

Account type – They do not offer demat or bank account. Only pure trading services are offered.

Brokerage Charges – Very cheap commission charges. Many of them charge flat brokerage that is on per trade basis. Some charge on monthly basis, for unlimited equity trading.

AMC – There is no annual maintenance charge since they do not hold any securities for the trading account.

Brokerage charges – Help trading in small quantity. No minimum brokerage charge.

Call & trade – Additional fee for call and trade services.

Penny stock trading – Since brokerage is mostly 0.01 percentage or nil for equity intraday hence good for penny stocks.

Software charges – Trading platforms like a website, mobile application and trading terminals are free.

Funding – They do not provide funding to clients.

Margin money – They offer standard margin money and is same for all clients.

Investment options – Limited options, only stocks, commodity and currency derivative trading at BSE, NSE and MCX.

Target customers – Mostly those traders who are looking for low-cost execution of their trade and who trade very frequently.

Focus – Fees are kept very low because they offer fewer products. They try to keep their operational cost as low as possible. They are more volume oriented.

Examples – Zerodha, SAMCO, RKSV Securities, My Value Trade, TradeJini Financial Services, SAS Online, Trade Smart Online, Trade Plus, Wisdom Capital, Fyers, etc.

It is possible to make good money in Indian stock market. Once you have decided your broker let us move forward.

For Free Trading Tips Visit: https://goo.gl/2nhRwT

How to select the best share broker in India?

Brokers are individual’s (or firms) directly linked to Indian stock market. Whenever an individual or an institution wishes to sell/buy shares he approaches share market through the broker. They have the same reputation as any lawyer, or banker or accountant. And charge a fee for their services.

How to select the best share broker in India.

With increasing number of individuals investing in the stock market, there is an increasing number of brokers and sub-brokers too. Many investors face a problem of selecting which one to approach. One should know what he should expect from a broker. One should have a clear overview of Indian stock market for speed and ease of doing business.

Certain points to keep in mind regarding which broker one should select which will best suit an individual.

  1. Full service or discount broker

A full-service broker is the one who charges you a brokerage as a percentage of your trade value. Investors who do not trade too frequently should take their services.

A discount broker will charge his brokerage on bases of per trade. So if you are a day trader or trade very frequently you should take services of discount brokers.

For account opening with both of them require documents like PAN card (and now a day’s Aadhaar card), address proof in form of Voter ID or driving license or bank statements, income proof as 6-month bank statement or salary slip or income tax return. Investors should self-attest all the documents.

Must Read: How to choose the right stock broker?

  1. Online or offline/phone trading

Many brokers have a facility to provide online trading services. Some brokers provide trading on the phone. Investors can trade by visiting their location where they can get call support also. If an investor can manage on his own then he can trade from the comfort of his home/office on his laptop or desktop or mobile. Most of the brokers provide online services by issuing them the password for their username/number.

Find which service is suitable to you and then you can check with the broker whether he is providing that service.

  1. Trade frequency

An investor is the one who trades occasionally usually few times a year and brokerage charges do not matter much. A trader (and also day trader) is the one who trades few times a week/month and brokerage charges do matter because it has an effect on his return on investment in the long run.

So before choosing a broker, you should know that what you are an investor or trader? Trading frequency does matter. One can benefit from intraday trading also.

  1. Need guidance or can work independently

Will you need someone to help you which stocks to buy/sell or you can do it on your own independently? If you need someone like financial advisor then do some background research how good the broker is known to provide advice. Full-service brokers have staff for research, chart reading, trend analyzing etc.. Based on these they give advice to their clients which shares to buy, when to buy and similarly during selling when to sell shares to make a profit.

  1. Noninternet trading

Many people are not comfortable trading on the internet, or sometimes their internet speed is not sufficient or may not get proper signal strength on their smartphone to close their trade. In such a case they can call and trade. Some brokers provide this service of call and trade and may charge extra. When using call and trade do ask them what is the normal waiting time as these lines are very busy during the trading session.

One can make money in Indian stock market provided he takes the initial right step in choosing a good broker.

For Free Trading Tips Visit: https://goo.gl/2nhRwT