Stock Market Investment: Top 4 Equity Investment Tips for “Beginners”
Many people with allocable surplus would like to make some extra money through wise investments are often confused and just don’t know how and where to start from.
Thank you for reading this post, don't forget to subscribe!Moreover, beginners may not be aware of equity investments and why it is an ideal form of investment. Understanding the stock market is one of the most important things a beginner should do. This blog will simplify all the information needed. First, let’s understand what equity is all about:
What is Equity?
Equities are shares issued by companies as part of the ownership on receipt of the money therefor. The company’s Capital is represented by the shares issued which are distributed to the investors who become technically as the owners of the Company (those who buy those shares on prescribed payment)
An investor will buy shares in a company while expecting to earn some dividends or sell the same shares in Stock Exchanges like NSE/BSE, to get a profit when the prices increase. This is called Equity Investment. This can be done by buying the shares in Secondary markets say BSE/NSE or apply and get, through IPO directly from the company.
When you, the investor, buy such shares, you make an investment in equity shares and become the partial owner of that Company.
The investor buys the shares when they are at a low price. They will look out for price fluctuations in the stock market and when the price rises, they sell them at a profit. However, this method is mostly adopted by investors interested in short-term gains.
Beginners should understand that such investments are not consumed on the same day. Rather, they are made to receive long-term returns. They need to know how to go after the wealth creation strategy. Goodwill makes it a point to differentiate between wealth creation,preservation and enrichment of the investment and helps you in all these.
Equity Investment Options
The following equity investment options are best suited for beginners and people new to investing in Stock markets:
Shares
As stated earlier, shares are tokens of ownership of a business. You become the shareholder of the company when you invest in shares. There are designated stock markets where shares are traded if they belong to listed companies. They are the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
As a shareholder, you have to accept both the profit and loss of the company. If you manage to buy the shares at a low price and sell them at a higher price, you will gain profit. On the other hand, if the opposite occurs, you will suffer loss.
The potential returns from investing in equity can be high but the risks can be high as well.
Equity Mutual Funds
Equity Mutual Funds are where the money is collected by an Investment company, from multiple investors and invest in equity shares across various companies. This method is suitable for those who have less knowledge about trading and have little time to conduct their research.
Beginners should know that it is quite difficult to research on your own as it can be time-consuming and confusing. Therefore, it is best to seek advice from India’s best equity broker, Goodwill Wealth Management and invest through them in MFs.
Equity Mutual Funds can be further divided into several funds based on the capital they propose to allocate and deploy:
1) Large-cap equity funds
Companies that are well-established with steady performance will be able to provide stable returns. This is the best option for budding investors.
2) Mid-cap equity funds
If you wish for well-balanced returns, investing in mid-cap companies is the way to go. Mid-cap companies are listed in the mid-range of market capitalisation. So, your risk-reward ratio is well-adjusted.
3) Small-cap equity funds
As a beginner, you might not want to invest in small-cap companies as they are the most unpredictable and have small market capitalisation and risky
4) Multi-cap equity funds
If you want to diversify your portfolio, you can consider investing across multiple market capitalisations.
Equity Futures and Options
There is another option for you to invest in equities on a short-term basis: by trading them in the derivative market. A derivative is a secured way of trading where you can purchase an underlying asset based on a pre-determined rate at a future date. It is mostly used as a “Hedging tool” to minimise the loss.
Arbitrage Schemes
Arbitrage Schemes involve the buying and selling of the same stock simultaneously but on different stock exchanges to gain profit from the price difference in different markets.
Why you should invest in equity investments
Equity Investments help you attain financial goals and hedge inflation. Traditional methods of investing like FDs are not just sufficient to secure your money from inflation although it is risk -free.
Moreover, equity investments have the potential to outperform returns offered by most assets like Gold, Real Estate, Debt and so on. They show the promise to perform better than any other type of investment.
Equity investment is very lucrative for people looking for long-term investment and those who want returns at a faster rate. The goal is to increase the value of investment by Capital gains,and shares only are capable of giving both-capital gains and dividends.
How to Start Investing: Set your goals!
The following steps will help you get started on your investment journey:
Plan for the long-term
As a beginner, you may get excited about investing and receiving returns. However, you need to realise that investing on one day and selling on the next day, does not make you an investor.
A new investor should understand that before investing they need to commit to stay invested for a long term. It is essential that you prioritize your money according to your needs. Know that you should not invest the money you may need in the next 12 months. Once you have set aside an amount for investing, give yourself the reassurance that this money will only be used for investment purposes. You have to commit to the idea of investing consistently, no matter how the stock is performing in the market.
Planning for the long-term is a better option anyways because the short-term contains too many uncertainties and risks in stock prices.
Understand the type of Investor you are
Ask yourself how much risk you are willing to take and what type of investor you are. Are you willing to do your extensive research or are you not interested in doing the homework? Do you want to be actively involved in managing your money growth?
Before starting your journey into an investment, make sure you answer these questions and outline your investment goals. Establishing why you are investing is the most important thing a beginner can do. Obviously to get more ROI than other modes.
It will also prove beneficial if you try to have an understanding of how the stock market and price fluctuation work. As a long-term investor, you should not look at the dip in prices as a loss but rather a gain because you can purchase stocks at a lower price.
Select a broker
You cannot start investing without having the relevant accounts needed to carry out trading and investing. Before approaching a brokerage firm, make sure you have a bank account ready.
Opening a Demat account and a Trading account with a brokerage firm that offers the lowest equity brokerage in India is essential. You also need to submit your KYC papers.
Goodwill Wealth Management is one of the best share brokers in India. Avail of their expert guidance, learn about which stocks are performing well, and get regular market statistics apart from availing their free tutorials and lowest brokerage.
Diversify your Portfolio is the Key !
It may seem comfortable to keep investing in the same stocks or the stocks that performed well in the past. However, when it comes to investing, you must invest in multiple avenues. Whether that involves investing in multiple companies or using multiple investment options, intelligent investors will not limit themselves to investing in one sector.
For example, if you buy expensive stocks in energy, and the stock market crashes, it will erase the value of equity investments, affecting your entire portfolio. Therefore, it is better you invest in different sectors like travel, tech, entertainment, banks, and so on. The same rule applies to investing only in large-cap equity funds. You are free to invest in multiple companies with different market capitalisation. This is the best way to minimise risks in equity investment.
Essential Tips for Beginners
1) Only invest in businesses you understand
2) Avoid high-volatility stocks until you become used to investing
3) Don’t go overboard with diversification
4) Keep track of your investments but don’t watch over them like a hawk
5) Don’t always chase the best stocks : Wait for your turn on your terms.
6) Do your basic study before buying and selling shares
- Do not buy in bulk, do it in stages- “Buy Low, Sell High”
The Bottom Line
You can grow your wealth if you educate yourself, do your homework, and follow the thumb rules of investment. That way, you will have a higher chance of getting better returns. Even as a beginner with a small amount of money, you can still start investing. However, remember that it involves many steps from choosing the right investment to selecting the right brokerage firm.
Having a genuine and transparent broker is a must and beneficial as it helps monitor your investments and ensure timely Pay out and easy Pay-in process. Yes, now you can open a Trading and Demat Account with Goodwill in just 10 minutes and seek any help when you need . Avail Free online/offline training on Markets also.
Magic Mantras to reap profits in Stock Market ! Use their wealth Building product-Power stocks.
- 1.Always take informed- research based – decisions.
- Money does not come so easily. You have to work for it. So make a study and invest.
- 2.Invest in Business you understand and not based on market gossip. People have their own motives and sometimes misguide others. It is your money and your decision -that matters !
- 3.Always Invest your own money and not play with others money or borrowed money. No one will question if you lose your money, but it is not the case when you borrow. Do not speculate, It’s highly risky. Fear and Greed are the two contributing factors for loss!
- 4.Don’t try to beat the market: You will never succeed: Sail with the wind. Be patient.
- 5.Discipline yourself to do planned investments, driven by non-emotional moves.
- 6.Broadbase/Diversify your portfolio: Never get emotionally bonded towards any share.
- 7.Be pragmatic with a poker approach- neither optimistc nor pessimistic-but realistic!
- 8.Do not be greedy or over anxious or superstitious in the market operations.
- 9.Beware of Risks and protect yourself with Hedging tools like option trading.
- 10.Monitor constantly and initiate timely decisions to book profits or minimum loss. Greed never works .
- Keep the control gears with you always and act with utmost alacrity.
For all your investment needs feel free to reach us.