5 Best Stock Market Investing Tips For Beginners | Espresso

5 Essential Stock Market Investing Tips to Know

Although the COVID-19 pandemic caused economic slowdowns almost all across the world, the Indian stock markets witnessed a stellar run during that period. As a result, both Nifty50 and SENSEX touched their all-time highs in October 2021. As a result, a large number of retail investors rushed in to secure some profits from the rising stock markets.

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This was evident from the fact that the number of investor accounts with the Central Depository Services Limited (CDSL) rose to 4.6 crores in September 2021 from 2.12 crores in March 2020. Out of these, almost 1.3 crore accounts were opened between the period of April 2021 to September 2021.

However, investing and gaining profits from the stock markets isn’t as easy as it may seem. Unlike mutual funds, ETFs, NPS, and other market-linked investment instruments, making direct investment in equity shares comes with a very high risk to reward ratio. So, you need to understand that while stock markets can be very rewarding, they can also eat your entire capital.

That is why you need to be very smart, careful, and diligent while investing in the stock markets. If you’re a beginner, here are a few tips for the stock markets you should keep in mind before kickstarting your stock investing journey.

5 Tips on Stock Market Investing

Here are the top five stock market investing tips:

  • Avoid the herd mentality

This is one of the most common and most crucial stock investing tips that you’ll ever come across. Yet, most rookie investors make this mistake and ultimately lose their money. Typically, people tend to get heavily influenced by the actions of their neighbours, friends, colleagues, or relatives. If everybody around them is investing or talking about a particular stock, they also feel the urge to do the same.

However, this strategy can backfire in the long run. You should strictly avoid the herd mentality if you don’t want to lose your money in the stock markets. Instead, you should take your investment decisions based on your research, knowledge, and understanding.

The world’s greatest investor, Warren Buffet, famously said about stock investing, “Be fearful when others are greedy, and be greedy when others are fearful!”

Also Read about Stock Investing & Trading

  • Do not try to time the market

This is another very useful stock investing tip for beginners. Timing the market is an art that you will learn with time. Even the most experienced stock market investors fail to time the market properly. So, why try to swim against the tide?

Trying to catch the tops and bottoms can leave with nothing. So, you should never try to time the market at the beginning of your stock investing journey. And in case you try to do that, you can end up losing more than what you earn. You should instead pick the right stocks, conduct your research, and wait for a specific term before redeeming your investments.

  • Invest only in the stocks of fundamentally strong companies

After the end of the financial year 2021, a total of 7,462 companies were registered on the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE) combined. This gives you an ocean of choices when it comes to investing in the share markets. You can choose and invest in any listed stock on a given day unless it’s banned by the NSE or BSE.

However, this is where you need to be very careful with your choices. You may see a lot of shares climbing or falling rapidly, but you should always invest your money in the stocks of fundamentally strong companies. Penny stocks may lure you with the potential of generating very high returns, but they are highly risky.

  • Do not let your emotions cloud your decisions

If you want to become a successful stock market investor, you need to take control of your emotions. Several investors lose their money in the stock markets due to their inability to control their emotions, specifically fear and greed.

In the bull market, the greed for earning more forces the investors to make wrong decisions. They fail to exit their positions in time, and as a result, they lose their money when the market tumbles again. Similarly, in the bear market, the fear of losses envelops the investors, and they exit their positions in haste. And when the market moves up again, they are left with a sorry feeling.

That is why there is no place for emotions in stock investing. You need to know your targets and stop losses, and trade accordingly.

  • Invest only your surplus funds

Equity markets are highly volatile and risky. So, if you want to invest in these markets, make sure that you’re investing only your surplus money. This will ensure that even if you lose all your money in the worst-case scenario, you won’t fall into debt.

Also Read: Bear Market-How to Invest in Falling Market?

It doesn’t mean that you will lose your money in the stock market. You can also make huge gains and even multiply your wealth within a short period. However, you can never be 100% sure about the stock markets.

To Conclude

If you want to translate your stock investing journey into success, don’t forget to follow the tips for the stock market mentioned above. Be diligent and smart while making your investment decisions. Also, create a well-balanced portfolio and keep reviewing it at frequent intervals.

Share Market Knowledge Centre

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Frequently Asked Questions

You can open a Demat account online or offline. To open a Demat account, you need to select a stockbroker and visit its official website or registered office. Then, you need to submit the required KYC documents as per the SEBI guidelines. Your Demat account will get active for stock investing only after the verification process.

The stock markets remain open for trading from Money to Friday (except on public holidays) between 9:15 AM to 3:30 PM. You can place after-market orders (AMOs) after the closing of the stock markets. Such orders get executed when the market reopens on the next trading day.

 

As per the Securities and Exchange Board of India (SEBI) guidelines, you need to have a Demat and trading account if you want to invest in the stock markets. After opening your Demat and trading account, you can place buy or sell orders at the stock exchanges by visiting the online platform of your Demat service provider.