How to be a stock market investor?— Let me explain a story– One task has been given to two-person. One is a 15 year’s boy and the other one is a Chartered Accountant.
The task is- they have to pick some good stocks which can give them a decent profit soon.
*[How to be a stock market investor?- Briefly, first, you need to have a DEMAT account, You need to set a budget, You need to do research to pick some good stocks and then invest and give some time to grow.]*
After some years the stocks chosen by the 15 years boy perform very well rather than the stocks chosen by the CA. How the little boy did that.?
We will discuss this. Here you will get an idea that How to be a stock market investor.
Because you should know that- If the base is strong then the building will also be very strong.
If you read this article carefully then you can earn from the stock market if nothing goes very wrong.
Because strangely some beginners have fear by the name of the stock market.
Because we have seen many people losing their money in the share market rather than someone is earning from the share market.
As well as we are told to stay away from it.
To motivate you let’s take an example- If you or someone in your family had invested Rs 10,000 in Wipro share 40 years ago, it would have been Rs 700 crore today.
Now you will think that many people could not invest 10,000 rupees at that time.
OK, if you had invested a thousand rupees, it would have been 70 crores today.
But you have to think that where there is such gain, there is also a risk or loss.
Here we will discuss the most frequently asked questions so that you can easily start investing in the stock market.
How to open a DEMAT account?–
You can open a DEMAT account through your mobile. Firstly, just take three pictures of three of your documents.
You should choose a discount broker to open the account.
And keep your AADHAAR CARD with you.
You can open your DEMAT account in Zerodha.
Just you need to have the above-discussed documents with 200 rupees.
You can also open an account by paying just 99 rupees in UPSTOX, as well as they also run free offers.
In UPSTOX the rate of Equity delivery is -free and if you do intraday trading you need to give just 20 rupees per trade.
This is the facility of a discount broker.
Is Stock Market risky? ( How to be a stock market investor )–
When you buy shares of a company with very little money also, you become a partner of that company, hence the name is stock market.
You become a co-owner of that company.
Now if the company you have invested in goes bankrupt then you will be at loss and if that company performs very well then your money will go up.
This is simple. Here you will not get any interest from the stock market because it is not a loan. So there is a risk here but the return is higher because there is a risk.
But here we will also discuss how to reduce the risk as much as possible.
How much return can we expect–
Here also you can take the previous example. There is no limitation in it. It can be 1 percent as well as it can be 100 percent.
Many stocks in the market can’t make a single penny in a few years and many stocks can grow hundreds of times in a year.
The above example is just for one share but when you invest, don’t invest in one share, invest in few shares so that if one of your shares sinks, your overall profit from the next shares will be right.
You should invest at least 8 to 10 shares.
So when you have a basket of stocks and if you invest here after doing proper research for long-term, you can expect to get 18 to 20 percent interest from here.
You need to choose some good stocks.
This return is possible because India has a high-growth economy. But you have to invest for at least five years.
There are many such investors from low-growth economies than India, picked some stocks that have given them returns of up to 30 percent per annum.
But you need to pick some good stocks.
How to pick good stocks ( How to be a stock market investor )–
Before selecting a stock we look at a lot of things like the chart, price movement, company’s history everything.
But unfortunately, we don’t check a single major thing which is probably the most important thing.
Now all the big companies in the market have this quality.
No matter how big a company you choose, the one that has the best performance today may be the one that got worse a few years later.
If you check, you will see that 70 to 80 percent of the companies that were included in the Sensex twenty years ago are not included in today’s Sensex.
So you need to find competitive strength or moat in your stock so that it does not happen to you.
What happens in a country where the market is open is- what JIO has done with all the other Telecom companies.
The company has the money suddenly comes to the market and either by reducing the price or by buying all its competitors the company becomes a strong opposition.
And in this way, the companies assume enormous size. Now how do these companies get so big and how do they maintain this?.
We call this competitive advantage or moat.
It may be that the company is not big, the company is small but it has a competitive strength for which its competitors cannot do anything to it.
Types of moat–
This you should know in the topic how to invest in the stock market.
- The first one is government protection. That means the government has kept the company out of the competition.
- For example, if you open a restaurant in the market, anybody can open another restaurant next to your restaurant.
But if you run a credit rating agency, no one else will be able to open a credit rating agency like you.
Because the government has allowed only 5 to 7 credit rating agencies in the last few years. And it’s almost impossible to get a new license.
Here the government is keeping these companies out of the competition. So when you buy a stock, you should see if your company has this point.
2. The second one is a low-cost moat. Suppose you want to open a cement factory and the most important thing you need to make this cement is limestone.
Now suppose you have a limestone quarry or mine from the beginning, so the cost of making cement will be much less than your competitor.
So when you are making it for less money then you will sell it for less money.
So the customer will be more interested in buying your cement so in this case, you should look at the stock to see if there are any such points.
3. The third one is distribution reach. In this case, we will take the example of a distribution of the HUL company.
This company has so many products that this company sells some of its products from a general store, to some products from the medical store also.
So when you buy a stock, you should see if your company has any such distribution reach.
4. This one is called Brand. You may know that Maggie of Nestle company was noodles first, then slowly they launched pasta, ketchup, everything within the company brand.
And it builds credibility in a very short time.
Other companies have to spend a lot of money on marketing or ads. You can take Dettol also as an example.
It has everything like soap, anti-septic liquid, hand sanitizer E.T.C.
You have to search for this point also, while you are buying a stock.
5. It is called patient. Most MNC pharma companies work on this business model. Such as patenting a new drug as soon as it is discovered so that no other company can compete within the upcoming 15 to 20 years.
6. This one is Network Effect. This is one of the most important moats. Like- why do we use What’s app.? Is it the best.? Maybe yes or maybe no. But we use it because everyone else uses it.
The reason we can’t use any other app is-even if we use it, the people we use these apps to talk to aren’t available in one of those apps.
The same goes for Facebook also. This is why they are so strong because everyone uses them.
This is one of the most strong moats. You must look for it while you are buying a share.
7.It is called switching cost. For example, in the beginning, we had to change numbers to move from one telecom company to another.
Then we got the advantage that we can move to any telecom company by keeping the same number.
For this reason, also many telecom companies go bankrupt. But many companies have this till now like-
Many IT companies also have this switching cost moat.
If you spend a lot of money from an IT company to buy software and train your team on that then every year you can not leave that software and face any other software.
And this is exactly why many companies profit a lot of money from foreign customers with maintenance fees or annual charges.
This is also a very strong moat.
These are the most important thing which you need to check before investing. You also need to look at the chart, company history E.T.C.
How much should I start with ( How to be a stock market investor )–
Where you are investing is more important than how much money you are investing in the stock market.
First, you can start with 1000 rupees per month and increase it by 15 percent every year.
Like if you are investing 12000 thousand rupees in the first year ( 1000*12=12000) then in the next year invest 13800 rupees ( 1150*12=13800) and so on. Whenever your income increases, you increase your investment.
Now if you get only 15 percent return yearly then also you can earn 1 crore rupees after 25 years.
But make sure you invest for 25 years, increase your investment by 15 percent yearly, and should get a return of a minimum of 15 percent. So you have to pick good stocks.
There are many calculators available in the market, which you can use to calculate the return.
How you can start this–
You need to have just three documents to start. These are- Bank account, PAN card, Adhaar card.
They almost do not take brokerage. This is what you can do online.
Why stock market has a bad name?
When we buy gold or land then we do not think that we will sell it in two or three months. But when we are buying a stock then we think this.
Time should be given to increase the share price.
Don’t think you will be rich overnight. Research well before investing and give time.
What is a stock market/How does the stock market work? ( How to be a stock market investor )–
If you need money to run a business, either you take it from home or you take a loan from a bank.
But if you need a huge amount, you will not get it from home and no bank will give you a loan.
Then who will give you this money.? The people will give you this money.
If you explain your business model to the public and if the public likes it and trusts it then they will pay you.
Instead, you will make the public a partner in your company because they have invested money. The partnership is called a share.
Now if you need money and you want to sell your shares then who will you sell to?.
Because the company has invested the money in the business and they will not buy your share back. Then who will you sell to.?
So there is a need for a market where you can sell your stock to anyone who wants to buy it. We called this Bazar a share Bazar.
Where you can buy or sell shares of more than four thousand companies whenever you want. But there is market timing of this Bazar.
Here you will find buyers or sellers for trading your shares most of the time.
Just imagine you can be a partner of TATA, HUL, NESTLE, and many more with just some simple clicks.
Some books you need to follow-
The stock market is like an ocean. If you want to learn better then you have to take the help of some books. Like- RICH DAD POOR DAD by Robert Kiyosaki, Learn to Earn by Peter Lynch E.T.C.
Also, you can follow an advanced book- The education of a value investor by Guy Spier.
1.How do I start investing in the stock market?
As we discussed before first you need to have a DEMAT account. Then you need to set your budget.
Then research well before invest. And after investing give some time to grow.
2.Can we earn 1 lakh per month in stocks?
You can earn more than that also. Also, you can lose all your money.
It is depending on which stocks you are selecting to invest in.
3.How much money do you need to buy a stock?
As we discussed before you can start with a very small amount.
There are such stocks that are worth one rupee and such stocks that are worth a lac.
4.Can I get rich from stocks?
Surely you can. But this will not happen overnight. You need to keep patience.
Also need to pick good stocks.
5.Can I invest 100 RS in the share market?
You can. Hope you know that there are many stocks worth less than 100 rupees.
So yes you can but we want to remind you that research well before investing.
6.How to invest in the stock market for beginners with little money?
First, you need to set a goal. Then you have to learn about the stock market. Then open a DEMAT account.
After that, you can start. Check How you can start this section to know more.
7.How to invest in the share market online?/
How to invest in the stock market?
There are many online platforms available in the market. As we told you before, you can choose Upstox or Zerodha to invest online.
Many others sites or applications are also available in the market. Check them first before investing.