Things to keep in mind before investing in stock market for the first time
According to Wikipedia, a stock market, equity market or share market is the aggregation of buyers and sellers of stocks or shares which represent ownership claims on businesses.
Let’s understand this in simple terms. Suppose a company wants to raise it’s capital and it registers itself in the stock market, it is now available for people to buy and sell. The primary purpose of stock market is to regulate the exchange of stocks as well as other financial assets.
Stock market depends on the economic rise and fall of a company depending on which the trader gains profit or experiences a loss. A person should understand stock market or learn about stocks on a trading platform before investing.
Here are a few things one should know before investing in stock market:
1. The first step before investing in this is to understand how stock market works and to have a basic knowledge about it. Stock market can be risky but following the correct guidelines one can gain profit. You should have patience and do not make any rash decisions while investing. Identify good companies, make smart decisions and reduce the risk rate.
2. A trader is someone who is aware of the stock market. He is alert of the fluctuations, analyses the pattern, stays updates by the news and seizes a good opportunity to buy or sell his shares. An investor is someone who finds a good company and invests in it. They wait for a longer duration to gain profit. For example they buy a share of a company which is under a great loss at that moment. So they buy it at a low price and wait for the company to make profit so that the value of their shares increases. A trader or an investor should be aware and have total understanding of the share market.
3. Open a Demat account and a trading account. Trading account is used to buy and sell orders in a share market. Once we buy a share then it is saved in our Demat account. It is a digital wallet.
4. Who are Stock brokers? A Stock broker is a share holder registered representative. Any transaction in a stock market is done through a stock broker. They give investment advice and offer tips and tricks for us to gain profit. They help in setting up a trading and Demat account. Choosing the right Stock broker can be really beneficial.
5. Understand what are NSE, BSE and SEBI. The National Stock Exchange of India Limited(NSE) is the biggest Stock Exchange in India and Bombay Stock Exchange Ltd(BSE) is the oldest Stock Exchange in India. People can trade stocks by knowing about them which are listed in NSE and BSE. Securities and Exchange Board of India(SEBI) is a statutory regulatory body which regulates the Indian capital and securities market. It looks after the legality of the stocks of companies which are registered and made public for people to invest in.
6. A person can invest in multiple shares. For them to understand if their shares have made a profit or not one has to check the stock market index. Stock index or stock market index is an index that measures a stock market or a subset of it. It is a statistical measure which shows the changes taking place in a stock market. Sensex and Nifty are two such examples.
Sensex is a stock index that reflects the BSE and Nifty is the NSE stock index.
All this might look too much to keep in mind and might look risky, but nevertheless investing in a stock market is a really good opportunity for investment and to gain profit. Just understand the process well and take help of a technical platform to gain more knowledge.
Understand the demand and supply situation and keep yourself updated about the latest news and events taking place which might affect the stock market. Some people invest for a few minutes while some for years. Know which holding period works for you and then invest either for long term or short term.