How to Invest in Stocks for Beginner? – Part 1

Hello, welcome to today’s topic and today’s topic is how to invest in stocks for beginners? This is for people who have no clue, who have no idea, who just entered the stock market, who just turned 18 or going to turn 18 and this article is for them, and this is only for basic guys.

Now we’re going to do a six-step process on how to invest in stocks for an absolute beginner who has no idea.

Step 1:

First step obviously is to open a demat account. Now what is a demat account? It’s an account where you can start trading stocks, there’s a broker you have to choose a broker and you have to start trading through that broker and all your shares go to NHDL and CDSL, where everything is cleared and stuff like that. So, first demat account. Now Grow has a demand account which also has zero AMC charges. AMC is something that you have to pay every year it’s called account maintenance charges that keeps going annually. So, grow has a zero account maintenance charges thing and also has very low brokerage fees as well.

You can choose any other demat account as well not necessarily grow but I’m just saying for example. but it’s up to you. But the first step is getting a demat account.  Get a broker get a demat account and you can do this as soon as you’re 18. That is the first step.

Step 2:

You have done and you have finished your demat account. Now the next question is “what do I do there’s so many stocks here, I don’t know so many different kinds of financial instrument is kind of scary, I don’t know where to start” okay before you even put one rupee into investing first you need to make a budget. First thing you need to do is keep a budget aside. Understand how much you’re making, what is your incoming the revenue that is there in your personal revenue stream, okay if I’m making say 50,000 a month or maybe 40,000 a month understand how much is coming in your pocket first and then say okay out of this 50,000 maybe I can save 10% or maybe I can save 20%. Ideally a good investor should save anywhere between 10% to 20%, Minimum 10% you have to save.

If you’re not saving minimum 10% that means you’re spending more than what you’re supposed to be earning. Either earn more or spend less that’s the only way it works. So, the first thing set aside a budget and say every month I don’t care about the amount but it’s a percentage every month 10% or 15% or 20% I will sit, and I will invest. Before you even invest this is what you need to do okay.

Now second thing you need to decide is after setting the investment budget aside what is my goal? what am I saving for? right am I saving for the next goa trip or am I saving to buy a car or am I selling to buy a bike or am I saving to buy a house which is obviously a little long term or am I just saving for a stable secure future? people have different goals like I want to save a particular amount so that I go for one international trip or something with my friends tomorrow maybe I don’t know. So, it is very important to first align your goals and understand why I’m investing because that investment goal will determine your investment time period also. So, if I want to go and buy a house then I have to invest for at least 10 15 years or if I want to buy a very expensive car I have to again save for 10 to 15 years or if I want to send my parents for a beautiful international trip and I know the budget is maybe 15 or 20 lakhs then I have to start saving from today and that would take maybe 10 to 15 years for me to save.

So, after setting a set that 10% or 20%, even if you get promoted and your salary increases, or you get extra revenue that 10% or 20% off that amount should be fixed. So, your amount might vary but your percentage has to be fixed. And then you decide how many years do I want to keep this right do I want to keep this until 35 or do I want to keep this just as a backup that I want to make a discipline of saving that’s also fine even if you don’t have a goal then your goal can be just saving that’s also a good goal to have but just don’t keep removing constantly.

After that once you understand this the third thing before you even buy a particular stock you need to know what is diversification? It’s called portfolio diversification. Now you’ve heard this saying don’t put all eggs in one basket right unless you own the basket okay don’t put all eggs in one basket. Because if you put all your money in say one stock and for God knows what reason something might happen even for the best of the best stocks right you might buy maybe every put all your savings into relevance and then something really goes bad to the reliance then you know you can’t determine your entire future on someone else. So, it’s always good to split. So, portfolio diversification basically says that ten percent that you’re investing every month or twenty percent that you’re investing every month you invested in multiple stocks, multiple good long-term stocks so that even if one goes up the other might go down it will balance your portfolio out, because see at the end of the day it’s your money and you should be safe okay think about it from that perspective.

So, three things under setting aside budget, first thing put a nice 10% or 20% or 25% percent budget on the side okay that’s very important, find out what is your goal for investment if it’s a milestone-based goal or is it just simple investing goal that’s also important and then realize that diversification is very important. These are the three things you even before you even invest you start this okay.

One more very important thing is, don’t go for quick short-term money. Quick gain lot of new investors in the market today are doing that most of them are investing in IPOS for listing gains, that means they get 10,000 rupees extra, 15,000 rupees extra they’re very happy and they’re like yes. Don’t think about it from that perspective please. If you are going to be a good investor, a diligent and a smart investor you will only win in the long term right compounding interest kicks in at long term, you can invest thousand today that thousand will grow for you make money, work for you okay don’t keep removing that money and just go to party and enjoy cool. We will continue in part 2!!