There are lots of doubts on the subject issue. Most of the question I faced from new investors who is very newbie to investing but want to invest in stocks. Daily newses on the down market and fair valuation of best companies attracting lots of new investors to invest in stock market. Most of them have doubt to where they can start and how they buy shares from the stock market. “How to invest in stock market?” is the question from them as the result of this thought. Below is the possible way to invest in stock market for newbies.
1. Open an online trading account and start purchase and sell shares. (Opening an off-line account also will do to those who doesn’t have internet facility. But, each time you have to call the broker and give your instructions to purchase and sell shares.)
2. Invest through mutual funds: This is known as the best methods to those who have very little knowledge on selecting and buying direct equity or stocks from stock exchange. This method not only make you to be a disciplined investor as well as your money will be managed by professionals.
Always choose the SIP (Systematic Investment Plan) method to purchase mutual funds. This is one of the best method to escape from huge lose as well as not bothering about the market volatility. Through SIP, you are authorizing the Mutual fund company to collect a fixed amount from your bank in a quarterly or monthly basis and purchase the mutual fund units.
For a newbie this is the best advisable method to have very good equity exposure to his portfolio.
Only point is to remember is, always select best performing mutual fund by considering its performance compare with peers as well as the capacity to generate long term income.
3. Buy Index Funds – You can buy good index funds to have maximum equity exposure to your portfolio. Can subscribe the index funds by contacting the Mutual fund companies. SIP method also applicable to these too.
4. Buy ETFs – Exchange Traded Funds also a good option to get full equity exposure. You can purchase ETFs just like how you purchase shares directly. Because of its nature, a newbie can purchase this and hold for long term to get very good returns from the economy growth. To purchase ETFs, you required to open a DMAT account as I mentioned earlier.
5. Portfolio Diversification to beat inflation: Diversifying portfolio not only give you exposure with multiple products but it is a good idea to beat against inflation. To diversify, you can have real estate mutual funds, international funds and gold funds and gold ETFs to your portfolio. All these investments are good to beat inflation.
Always remember this points:
1. It is not recommended to a newbie to enter direct equity market without gaining proper knowledge.
2. Always use SIP (Systematic Investment Plan) to purchase mutual funds to reduce your risk. 3. Don’t over diversify your portfolio. Investor should identify proper proportion of various investments depends on his goal, risk taking capacity.