The stock market is a marketplace where trade i.e., issuing, buying, and selling of stocks, bonds, etc. occurs. Investing in the stock market for the long term can help you manage your finances. It is an instrumental task of understanding stocks and shares. If you are just starting, then investing in the stock market could seem a little intimidating.
How is Investment Banking Related to Stocks?
Investment banks assist companies or individuals to create or raise capital. They arrange for the buying and selling of stocks and provide consultancy on better opportunities for investors, beginners, or professionals. It may seem intimidating to learn investment banking, but it will help you understand the stock market better.
How do Beginners Invest in the Stock Market?
- Determine the approach you want to take – Setting the approach you want to take in the beginning can make the future of your investing much easier. Your approach will also help you determine your investment management (long-term or short-term).
- Decide the amount you want to invest – The amount you want to invest can be decided based on the goal you want to achieve. It is inadvisable to invest in stocks if you need the money in the next five years.
- Open an investment account – To make all the trades in India, you need to open a specialized account, a Demat account, or a Dematerialised account. This account holds the shares and bonds in a digital form securely. The shares that are bought are deposited in this account which makes trading much easier.
- Choose where you want to invest – To choose where you should invest, you must first understand the options –
- Stocks – Stocks are ownership shares of a single company. They are purchased at a certain price and fluctuate according to the market. This makes it a risky investment.
- Bonds – Bonds are loans to companies or the government, and they agree to pay back in a certain amount of time. Till then you get interested. This poses a lesser risk.
- Mutual Funds – Mutual Funds are like a trust that collects money from different investors who purchase securities. They are a safe investment for beginners.
How Much Should the Beginners Start With?
It is advised for beginners to start investing as early as possible because your investment portfolio depends on it. When you start investing at a younger age you can take a risky approach, and if anything goes wrong, then you will have enough time to recover that amount and make profits. For example, during the Covid-19 pandemic in 2020, the stock market fell almost 40% only to rise to an all-time high over the next few months.
Many people delay investing in the stock market because they think it requires a lot of money. Nothing could be further from the truth. You can start with as little as Rs.500/- per month and can increase it over the years if and when you can get the funds.
Investing in the stock market is a great opportunity to gain wealth over the years. It gives every person an equal chance to earn money and also increase knowledge. There are investment banking courses with placements that can help you learn further.