- December
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Investing in Stock Market; BEGINNER’S GUIDE: Step by Step || Proven Methods ||

Stock Market. A place where millions of dreams have been shattered, yet everyday people consider this as a life-changing opportunity. Why is it that, even after the fact that almost 85% to 90% people ended up losing their hard earned money in this gamble, still a countless number of people are ready to play their luck on Stock Market.? Why is it that still beginner’s search for a Step by Step Guide which includes proven methods to make them help succeed.?

The answer lies within the earnings of those few, who have managed to crack the code and have been able to make money out of the Stock Market. Everyone knows that Stock Market doesn’t reward everyone, but those lucky few who are rewarded, have made enormous amount of cash out of it. Real life stories of Rags to Riches are very common in the field of Share Market.

Stock Market is not for safe goers, it’s meant for the people who are ready to take the risks, who are ready to think beyond the conventional thinking and find undiscovered potential stocks and shares.

Few people who have been able to make it big, in the Stock Market are Jordan Belfort aka Wolf of Wall Street, Rakesh Jhunjhunwala (investor from INDIA), And obviously the big daddy of investing Mr. Warren Buffet (world’s 3rd richest man). 

One thing that all of these winners state about Stock Market is that; no one has ever been able to make a right investment each and every time, the root to success in Stock Market is Failure itself

trading in stock market as a beginner

Things you are going to learn; 
A) Basics of BEGINNER’S GUIDE: Steps to follow before investing in the Stock Market as a beginner

Knowing the Stock Market?

Getting knowledge about Stocks and Shares

Deciding your preferred style of investing

B) Pro Tips for Investing in Stock Market as Beginner.

C) Things that can Destroy you in Stock Market

Let’s begin /-

What is Stock Market ..??

A stock market is a place where people with surplus money go to and find themselves an investment opportunity to invest, by doing this they are just speculating and giving their money to various companies, in hope of a good return on investment of ROI.

The stock market or capital market also acts as a blessing for companies, especially with low capital or funds, as they are given with an opportunity to raise funds for them on the basis of how promising their future plans are.

Globalization has helped businesses to grow in different countries, this means that businesses get an opportunity to get funded from foreign as well. To govern, set guidelines and protect the right of consumers, every country has its regulatory authority for the capital market. In INDIA the name for the same is Securities and Exchange Board of India (SEBI) established under the SEBI Act 1992.

Functioning of Stock Market /- 

  • Fair dealing and Transparency –

A Stock Market ensures that each and every transaction that is happening around the world of shares and securities, is happening in a protected environment. It gives the peace of mind to the investors that the companies which are listed on various Stock Exchanges comply with all the legal requirements and can be trusted in relation to their genuineness.

Earlier, these transactions used to take place on the papers, and as an investor, you have to keep the possession of those papers with yourself as proof of holding shares in a particular company. But in current times, the scenario has changed drastically (for good). Electronic transactions have made their way to Stock Market as well, which made investing, holding and selling the shares pretty easy, transparent and quick.

These electronic systems have been set up in such a manner, that it allows each potential investor who is registered in the Stock Exchange to get an equal chance of investing in various listed companies. In other words, it makes sure that no one investor (especially with huge money) doesn’t buy all the shares by himself.

  • Facilitating the price discovery of Stocks

Not only Stock Market provides an investor with a safe transaction but also helps in effective and efficient price discovery for shares issued by registered companies. It determines the demand and supply criteria for various shares and let the credibility of the company and the demand in the market adjust themselves and decide a price.

By doing this it eliminates the chance of big players in the Stock Market affecting various priced according to their needs, in other words it prevents the exploitation of investors as well.

It can only happen when a company issues its shares and let the market decide their prices.

  • Liquidity

There is no use of buying stocks when you don’t have a proper place to sell them when you want or need to. Also, if the selling mechanism is very tough, complex, long or is difficult to understand, in that case as well buying stocks doesn’t seem a good decision.

To solve this issue, Stock Market also doubles up as a place for selling. Not only new shares of companies are bought here but, existing shares are also sold to some other investor in time of need or want. The process is extremely simple and hassle-free. 

This is the reason why stocks are considered as good as cash, due to the fact that investors can sell them at any point of time, according to their prices on that day. The investors don’t have a tension of their funds being blocked for a long period of time, the same case which happens in Fixed Deposits.

  • Supports various types of people

From above it seems like that Stock Market consists of only two types of people

  1. Registered companies – who are there to arrange funds through shares
  2. Investors – who acquire these shares for long-term gains.

But when looked from within, we will find out that, people who are known as traders, market makers and speculators also exist. Traders generally try to deal in securities on daily basis, it means that they invest in shares in order to sell them at that particular day only. They are not long-term investors. Market makers are those people who try to keep the Stock Market in a high liquidity position. Market makers also try to facilitate the smooth transactions of selling and buying of shares. Speculators are those people who invest for very short term and try to outshine the long-term investors. These people try to speculate or predict the future market prices of various shares. A person who is not ready to take the risk, cannot be called as a speculator. People generally confuse the word gambling with speculating. The difference between the two is that gamblng is purely based on gut feeling whereas speculating is a process of taking calculated risks.

  • Rules for Companies in Stock Exchange

With the help of SEBI (Securities and Exchange Board of India), the Stock Market also makes the various registered companies declare their financial position and future plans to their shareholders at regular intervals. This way, a company knows that they are being constantly monitored and they cannot take any drastic step all of a sudden, without the consent of their shareholders.

This also creates a sense of satisfaction and makes all the investors who are trading in the Stock Market feel safe, and they know that there is a proper body of government, whom they can approach in case of any kind of fraud happens related to Stock Market and shares. Indirectly, this also increases the overall investment in the companies which eventually also boosts the growth of the economy of any country.

Pro tips for Investing in Stock Market as a Beginner

  • Don’t follow blindly

It has been observed, that very few people are able to understand the complex nature of the Stock Market and make money out of it, without any external help or advice. The outcome of this is that the majority of people try to look for some kind of advice or even worse they start following the pattern that is being followed by everyone. 

They fail to understand that the decisions which are taken after rational thinking, and after getting proper knowledge about the field are always the best. Many people have lost their hard earned money, due to the reason that they didn’t apply their brains and just blindly followed the market trend.

For those who are not able to understand the complex nature of the Securities Market and still want to earn a respectable (realistic) amount in the long term, Mutual Funds can be a very good option for them. This is because of the fact that Mutual Funds are the funds which are gathered from the public and are invested by highly trained professionals and big firms, in the Stock Market.  In return, these intermediaries keep some portion of the profits made after investing in Stocks.

Mutual Funds are also available in various types on the basis of risk, time and money involved in them. It means that various people with different expectations and different amount of money can choose according to their wishes and desires.

  • Systematic and Disciplined approach

By investing systematically and in a disciplined manner, it means to have a long-term vision for your investments. The approach should not be to consider just one particular stock but to also have alternate plans so as to compensate the loss in other stocks if any.  The goal here is to have a holistic approach and consider each and every factor prevailing in the market.

This implies that an investor should always have a plan B, in case if future outcomes are not according to our plan. Having a realistic plan is also another part of a disciplined approach.

Only short-term profits can be attained if the investment is made without having a pre-decided plan

  • Invest in companies and businesses you understand.

Around 90% of people miss this very important criteria before investing in the Stock Market, which is to understand the area and field in which a particular company operates in. Having a good understanding of the Companies operation is pretty different from understandin the Stock Market. 

It focuses on understanding the believes, organizational structure, and the way of operations of a business. In long-term it helps the investor to decide that whether the decision which is being taken by the company is correct or not, and on the basis of it, the investor can decide whether to keep his money in the shares or opt out.

  • Extreme emotions

It has been seen that many investors have lost huge sums of their money due to the fact that they were not able to take the decision based on their rational thinking and were taken over by feelings like Greed and Fear.

Once an investor starts making some money out of the Stock Market, he then thinks that he has gained all the knowledge and can now trade the way he wants. This overconfidence becomes the reason for his fall in the future as, after this, the investor starts taking big risks in the Stock Market without doing proper research and implementing the thought process. In the end as a results, the investor ends up loosing all of his hard earned money in the stocks.

Knowing the fact that greed takes you nowhere in Stock Market is very important, but equally important is knowing to change the stocks when market signals tell you to do so. But sometimes due to fear investors are not ready to do so, this also lets to the downfall of their money even after knowing the negative signals given by the Stock Market.

  • Diversify in Stocks

This is a advise which almost every genuine and successful Stock Market investor gives. Warren Buffet (greatest investor of all times) also puts emphasis on not relying on a single stock or a single company, irrespective of the fact that how much attractive that opportunity looks. It is basically for the fact that if you solely rely on single stock or single company, in case of any loss you are left with nothing. You are left with a 0 and to start again from this point is very difficult, most of the people are not able to get up after falling from this point.

Yes, its a fact that if that particular stock did exceptionally well, then you may not have earned that much as compared to if you have relied solely on that stock, but in case of failure you wouldn’t be able to get up again whereas in case of success you can continue investing and keep on finding more lucrative opportunities for yourself in the Stock Market.

  • Always invest your surplus

Investing the surplus amount of funds that you have in the Stock Market gives you the freedom and peace of mind that even in case of loss, your survival would not be at stake. Investing only surplus also becomes very important due to the fact that it is not at all sensible to speculate with all the money you have earned over the years.

  • Constant Monitoring

As we all are aware with the dynamic and constantly changing nature of the Stock Market, especially new investors need to know and master the skill of observing the market on regular basis and take actions in order to make their investments more profitable.

Various changes in the Stock Market also act as a base for further deciding of course of action. For example, in cases recession, almost every investor took his money out of Stock Market, if the investor was not aware of the latest happening in Stock Market, in that case, his money would have been reduced to a very large extent.

Strict NO’s or Don’ts for Stock Market as a Beginner

Stock market for beginners
  • An Aggressive approach in Stocks

The thing which is common among the people who have made it big in the Stock Market is the fact that they have an optimistic and slow going approach. These successful investors understand that the real gains are made in the long-term. 

They generally try to invest in startups with high potential and promising plan. They try to stay away from the Stocks which offer them high gains in a very short period of time, as they are highly unstable.

  • Don’t Panic in sensitive Stock Market conditions.

It is a proven fact that the Stock Market has a very dynamic nature, you can never predict with 100% accuracy that what will happen. This has been a major reason that why the majority of the people wanted to stay away from Stocks and Shares, in tough situations majority of the investors tend to panic and are not able to take the correct decision.

All they want is just to take their money out of the investments made in Stock Market, they forget that times will change the condition will get better. This is the point where big players in the industry have different opinion and approach, instead of just panicking and taking their money out, they try to think rationally and find out that is it really necessary to take the money out of Stocks or not.

They do not pull their money out of the Stocks of promising companies as they know that when the situation will improve they will get a handsome return on their investment in the Stock Market.

  • Ignoring the Expenses in Stocks trading.

Beginners in the Stock Market just see the big picture, they don’t know the details and minor things included. They think that they will just keep on investing in Stocks and keep on changing them according to the market situations and their needs.

One thing which seems to be pretty small at first can be a reason for low profit is the brokerage fee. This is the fee that every Investor in the Stock Market needs to pay to the broker every time he buys or sells the securities.

This fee can be very high sometimes as if the rates of the Stocks rise. This acts as a major concern for the everyday traders as they are very frequently in process of the selling and buying of shares.

  • Believe in Yourself as Stock Market Trader

After getting all the skills needed in Stock Market, you as a beginner need to trust yourself. You need to make yourself believe that you have the potential to take correct decisions all by yourself. You don’t have to depend on any other person.

It has been observed that even after acquiring every needed skill and experience in the Stock Market, investors doubt their capabilities and they cannot decide that in which Stock to invest without an external piece of advice.

Also not to forget that Warren Buffet (world’s most successful investor) and other successful people in this field, has also given huge importance to self-confidence and believing on your own skills, especially in an ever-changing industry like Stock Market.

Other related terms are –

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understanding the stock market for dummies

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