Post written by Sherin Dev. Follow my on Twitter
“Beginner investor = Lose”. This is a highly possible equation always providing by stock market to the beginner investors. I have received lots of queries on how to start investing and where to invest. Interestingly most of them want to trade for some days or months for become rich fast.
For a beginner, investing is not an easy task. Generally beginners come up with lots of doubts and confusions on investing. Most of them may turn to investing by the influence of colleagues, friends or some time relatives. They may see their friends or others are investing and heard the story of how they made profits by investing. Before knowing or trying to understand what is investing, most of the beginners open a trading account and put some money in it to start trading. At this point they are really getting confused on where to start and when!I am sure; you may one of among them either today or some time back when you really start investing. Yes, I have survived these situation years back but I can proudly say any of my received knowledge is not provided by anyone but I have acquired through practice and study. I am willing to share my own experience to all of you who willing to start investing as a beginner investor.
Before start investing, each investor should aware on three magic words that provide enormous investment knowledge than anyone really required. For you, here is that three magic words “Read….Read….Read”. Yes, reading is the only best solution to get enough knowledge on investing. But what should one beginner investor read? If open the internet, he will again confused with the articles and blogs writing all about investing and 101 investing tips etc. So, let us move one by one to understand what you want to read and when.
1. Read as a total beginner
Start from the scratch. To become a stock investor, you should count from 1 to 10 step by step after making each step through. Get adequate knowledge on what is a piece of stock and what stock market does, who all connected to stock markets and how stock market works. Learn about various stock market in the nations and the difference between each. Understand how and why companies listed to the stock market and understand what Initial Public Offers (IPO) by companies is and how could one buy and sell stocks from IPO and directly from stock markets. What are the requirements to buy and sell stocks and what are the costs including taxes, associated to it when buy and sell a stock. Understand, what a stock market index is and how stock market movements happening up and down. Learn about the direct and indirect factors that support the high and low of stock market volatility. I am sure; it will take a good amount of time and advice to not move further before getting sufficient knowledge on these areas. Once completed and confident on this part, move to the next.
2. Read and understand Stock Investment Instruments available today
Stock market investment not only can be done through buying stocks directly. There are various stock investment instruments available as single and bundle. Second area for a beginner to get knowledge is about these instruments and what is its difference from direct stock buying and selling. Learn on various investment instruments available in the market that related to stocks and stock markets. Direct stocks, mutual funds and ETF are the most important instruments where you should build your skills and knowledge. Understand, what is a mutual fund and different types of mutual funds. What are the difference between different funds. Understand, what is in an ETF (Exchange Traded Fund) and how one could benefit to invest on it. Learn what is index funds from mutual fund houses and its difference from Exchange Traded Funds or ETF’s. all the knowledge on these instruments help you to create a good portfolio that have good diversification, less risk and maximum profit potentials.
3. Read for Direct Stock Investment Knowledge
Third step to your investment life is read and learn about direct stock market investments. Start from understanding the types of investors and investments like day trading, long time value investing, growth investing and contrarian investing. Study the difference between short time trading and long time value investing. Learn the fees and commissions associated to transactions and the risks associated to various investing styles. Understand what is fundamental analysis and technical analysis and who all using the same. Know who all are known as traders and investors and why they know in those names. What is the subject in each of this analysis and what would be your option.
4. Learn from Greatest Investors
This is the time to learn more about the investment from the practices and stories of greatest investors in the world. In my personal opinion, this is one of the most important steps for beginner investors. This part highly influenced to create your own investing strategy which leads to your investment success or failure. Highly recommends reading the stories of Warren Buffett, Benjamin Graham, and Franklin Templeton. Get more details about these great investors, their experiences, styles and practices. You can rework upon some of their highly successful practice and advises to structure and create your intellectual framework on investing that later works better for you. Be selective when buying or reading available books on these investors.One of the important point you are going to receive from this step is, the do and don’t to investors. Don’t follow public, Do not listen to the word of brokers, tipsters and research analysts, are some of the best example for them. Real reading reveals these golden rules which could bring you as a successful investor.
5. Final Preparation to Become Direct Stock Investor
Finally, read to understand how one can select stocks to invest and the areas to take care when analyzing stocks. My most recommended guide in this area with powerful ideas is, “Commons Stock and Uncommon Profits” by Philip Fisher. Once after achieved real knowledge to analyze and identify what companies and businesses to invest and what to not, it is your time to go ahead with direct stock market investment. At this point, you would be aware about the right time to buy stocks and what influencing the stock market to come up and down along with the right price to buy and when sell the stock etc.Above five steps have arranged to a better way for a beginner to start the right knowledge at right time. I have practiced this immediately after I taste my first huge lose from direct stock investment which have made without any investment knowledge and experience but considering the word of others. I followed these practices to ensure no mistakes happen to me again whenever I am investing directly to stocks! Follow these practices. These are time taken but once you reached to the final steps by completing each of previous four steps properly, no one can beat you as a direct stock investor. It is my written guarantee for you!
Image courtesy: Randy Son Of Robert