- How We Invest Money In Share Market
- Can I Lose All My Money When Investing In The Stock Market?
- Watch Video: How To Start Investing In Share Market
- Invest In Share Market
How We Invest Money In Share Market – One of the biggest misconceptions when it comes to stock investing is that you need a large amount of money. Such misconceptions rob new investors of the benefits of getting started early and growing their wealth. They keep waiting on the sidelines to save enough funds to invest in shares. Or the fear of losing money also keeps them on the fence.
But you as an investor can start as low as Rs 100 as an investment in the stock market and enjoy long-term wealth creation.
How We Invest Money In Share Market
Why are you investing? While earning returns is an obvious answer, what do you plan to use the funds for? Are you trying to save for your retirement? Or, do you intend to buy a home in a few years? Or perhaps your children’s education.
Long Term Investments On A Company’s Balance Sheet
Based on the goals, you will be able to define the timeframes and the type of returns you want.
This is an important aspect as it helps you pick the right type of stocks (generally). Try to figure out which risk bucket you identify with:
While stocks generate good returns over a period of 7-10 years, depending on your investment horizon, you can choose stocks that offer reasonable returns.
You don’t need to be an expert but know the basics of stock investments. It includes some basic parameters of a company including revenue, profit, debt profile, margins and future growth prospects. Its area of operation also plays an important role.
Can I Lose All My Money When Investing In The Stock Market?
Check the stock price performance over the past few years – have prices consistently risen, been volatile. It can tell about your future return from it.
You just need to start. Create a budget for your monthly expenses and factor in a certain amount that you will save. Even if you can save Rs 500/1000 per month, over time, it will help you invest.
Investing is not a sprint. You need to start and stay to build wealth. If you have Rs 1000 to invest, look for stocks that fall within your budget and find the best option.
Slowly but surely, as your savings grow and your understanding of the market grows, you will have a portfolio of stocks that you have handpicked based on your investor profile.
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Penny stocks are shares that are available for Rs 10 or less. We are not saying that all penny stocks are bad. However, in most cases, the price of these stocks is low because the demand for them is low. This means that there are no buyers for these stocks in the market.
The prices of such stocks may be lower due to the company’s finances. It may be on the verge of breaking down.
Many investors turn to small-cap penny stocks because they seem like the best option with limited resources. While the growth potential may seem extraordinary, these stocks are high-risk stocks and you should consider the risks before investing.
When investors start out with little money, they end up closing many stocks later because they are too expensive. For example, an HDFC Bank stock is worth around Rs 1660 per share. If you have an investable amount of Rs 1,000, you will not be able to afford it.
Watch Video: How To Start Investing In Share Market
But if you have surplus funds of Rs 5,000, then generally, you rush to buy stocks like HDFC Bank among others, along with many investors in the same position.
While the company may be fundamentally strong, making a lump sum investment at the wrong time can backfire. According to many market experts, the market is overvalued at this time. Any stock investment you make today is expensive. However, you can still wait for a small correction to invest. Or perhaps, find a good stock to invest in.
Investors should consider diversification and not overexpose their investment portfolio to a particular sector or market capitalization. If the said sector suffers further losses due to any major economic reasons, then their entire investment will be at risk.
For example, Joe, new to stock market investing, invested in pharma stocks in 2018 and 2019. All of the companies were hit with stocks due to multiple FDA issues. The sector is severely underperforming. Now, Joe’s investment also took a hit.
Saving Vs. Investing: Understanding The Key Differences
But he also invested in hotel sector stocks, which performed well. So it balanced his portfolio well.
In 2020, with the outbreak of Covid-19, pharma stocks rallied well while hotel stocks were down. His portfolio was still in the green due to the rise in prices of pharma stocks.
That’s how diversity helps. Diversification should be considered not only in stocks or sectors but in investment instruments such as equity, debt and mutual funds.
Most new stock investors suffer because they let their emotions control their buy/sell decisions. For example, the recent market crash due to the lockdown resulted in many investors panicking and selling good quality stocks at low prices.
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You should ideally make decisions against facts and data and hold on to potentially quality stocks that are not fundamentally strong.
Many mutual funds offer SIPs where you can invest as little as Rs 500 per month in equity funds. This allows you to gain exposure to the stock market without having to invest in high-priced stocks individually. You can also copy the mechanism deployed by SIPs and create your own SIP to invest directly in stocks.
Remember, there is plenty of stock investment advice on the Internet with famous investors sharing their portfolios. New investors often replicate these portfolios assuming they will earn similar returns on a smaller scale.
This is dangerous because most of these famous investors do not share their entry/exit strategies. So, stick to the basics and look for the best ways to start investing with little money. Investing is not gambling.
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Stocks mentioned in this article are not recommendations. Please do your own research and due diligence before investing. Investment in securities market is subject to market risks, read all relevant documents carefully before investing. Please read the risk disclosure documents carefully before investing in equity shares, derivatives, mutual funds, and/or other instruments traded on stock exchanges. Because investments are subject to market risks and the risk of price fluctuations, there is no assurance or guarantee that investment objectives will be achieved. NBT does not guarantee any guaranteed return on any investment. Past performance of securities/instruments is not indicative of their future performance.
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*Please note: Investment income is subject to national laws and taxes, depending on where you live. This article is about investing in European countries.
How To Invest In Share Market, How To Buy Stocks
One way investments generate income is through dividends. If you’ve invested in a company by buying shares, for example, that company may give you a small portion of its earnings to its shareholders in return. Such payment is called dividend. Additionally, shares of a publicly traded company will likely increase in value in line with the company’s positive performance.
If you want to earn dividends from individual company stocks in your portfolio, there are several things you need to consider before buying shares.
If you only buy shares in a few companies, this strategy may not offer enough diversification. By not spreading your investments across different assets, you are increasing your risk – akin to putting “all your eggs in one basket”.
Moreover, if you are investing your money in the stocks of certain companies, you need to take time out on a daily basis.
Invest In Share Market
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