Are you looking for how to invest in share market? This may not be the best post for you. Because, this post isn’t about some expert tips or secrets. It’s a list of things I have learned about investing in share market – through books, through my personal experience and through the experience of some experienced investors I personally know.
So, how to invest in share market? What to keep in mind?
Gain the knowledge first
The biggest mistake people make while putting money in share market is going in blind. How much time did you spend in researching about proper investing procedures, companies you’re going to invest in and the market’s current state?
If you cannot say ‘a lot of hours’, you should probably not invest. It’s important to have a basic understanding of the market, basic understanding of investing to make profits and basic understanding on how to pick your stocks. Read books, analyse case studies, research the company profile and then, think of investing.
2. It’s not a get-rich-quick scheme
For many people, it is. And that’s all luck. If you’re thinking that you’ll put your money and double your money overnight, prepare yourself for a big shock. I am not saying, it’s not possible. It has happened to many and that’s mostly by luck preceded by lots of wait and careful planning. It’s highly probable that it won’t happen to you, unless you’re a very very lucky person.
So, don’t jump in to make money quickly. Jump in to invest your money so that a few years later, you get good return for your invested money, much higher than your FDs. Once you have all your retirement savings, child education savings, health savings, marriage savings, emergency fund and everything like that done, you can totally jump in this crazy world of getting rich quick through investing in share market. But until then, hold yourself and play smart and slow. You cannot afford losing money, so don’t.
3. Mutual funds, stocks, stocks with dividend – what to choose?
These aren’t the only options available. But these are some of the very popular and simple (according to me) that can help you get started. Mutual funds are less risky than usual stocks, but that also means your returns on mutual funds are quite limited (still, higher than fixed deposits).
I suggest you go for a SIP (systematic investment plan) which works on auto debit. So, you take up a plan and declare an amount you want to put in into the market every month. On your specified date, that amount would get deducted from your bank account and be invested in the specified mutual fund on your behalf.
Best part of SIP? You save even without having to save. For those of you, who lack control over their money and struggle to save, it’s a great option. Yes, recurring deposits are almost similar but they don’t give you great returns as this one does and they don’t come with market risks as this one does.
What about stocks and stocks with dividends? Some companies pay dividends. So, if you hold the stock of a particular company for long enough, you’ll get a part of their profits. They declare it at different time intervals, differs from company to company. Best part about dividends? It’s extra income that’s tax-free (as of the time of writing this post).
Stocks? Well, I told you in the first point that you need to study about all these. So, get started with that. Don’t go crazy in the beginning. Be slow,steady, smart and well-informed about your investments and you will never lose money in the process.
Bottom line is whatever you choose – mutual funds, stocks, or stocks with dividends, you need to do your research. Look at the numbers, history and company profile. Learn to analyse these things and then, invest. Don’t go in blind. Learn and then, invest.
Those are the top three things I have learned so far about how to invest in share market in India. Do you have any tips to add? Any questions? Comment below.