There are lots of youths in India looking for right advice on investing. They have a practice of contacting people who have answered to similar questions in forums or financial bloggers like me to get this doubt cleared. One common character among this people is, they all have no or very little knowledge on stock market investments, but want to invest only on stocks. Regular requests on investing with surplus money lead me to write this article. Hope this would be useful to those required answer with similar doubts or questions.
How to approach stock market?
New people to the investment world should not approach the stock market in an aggressive/active trading/speculative manner. It is always advisable to be conservative until getting all necessary knowledge on stock market and the methods to play safe to become rich in long time. Stock market is not the place to make money fortnightly but it is the place for investors with commonsense, patience and prudence. Young investors should not get attracted to frequent stock market trading by the motivation from others making money. Trading is dangerous than lottery and it can wash off your entire money in a fortnight. Instead, identify and understand the dangers behind the stock market involvement and make a good strategy to invest in stock market.
What to do if not investing in stock markets directlyYoung investors in India have lots of opportunities to invest in stock market using various methods. They can choose the route of mutual funds by selecting good mutual funds that investing to stock markets. However, investing in mutual fund also required knowledge to select the right one. Monthly Systematic Investment, known as SIP, in various good mutual fund would provide required profits to the young people. For start up investors, it is preferable to select equity oriented schemes to invest for long term.
How to select good mutual funds
There are lots of sites available to identify and compare various funds. Moneycontrol.com, valueresearchonline.com, mutualfundsindia.com are some of the best resources to identify and select good funds in India. Reading good financial magazines and watching financial channels also would provide youngsters with necessary knowledge to invest money on funds. Quality of fund manager, performance of fund for last few years, performance of other funds managing by same fund manager, total assets (larger is better) all needs to be compared, verified prior to invest on a fund. It is always advisable to stay away from new fund offers unless and until you are well aware about the fund manager. Monthly SIP of 2 or 3 good funds would be sufficient to build wealth for long term. Such portfolio and fund performance should be monitored at lease once in a six months.
Where to contact for further advices
Qualified financial planners are the best contact points to get right advice. You should select a financial planner to contact upon his qualification, experience and the report from 3 or more client of the him or her. Financial planners should not be an agent of any product, investment house, but should be a freelancer with high satisfied client base. Here is an interesting article tells “How to select right financial planner”.
Still want to invest in stocks directly?
Visit nearest brokerage firm and have a chat with their manager. Prior to visiting, note down what all you needs to know about investing and ask one by one to get all the doubts cleared. Start investing slowly and only to the good companies. Avoid IT, real estate, construction, telecom, airlines as these are hot sectors and would be difficult to valuate or organized sector or even low profit making business. Do your own research to identify best companies based on their businesses, profitability, management efficiency, stellar financial performances. Avoid companies with high debts, penny stocks and micro caps. Prefer companies having competitive business advantages by having monopoly product or services, giant market share, excellent management, low cost production and higher profitability and year to year growing profit with excellent financial performances. Once identified such companies, wait patiently to get the prices comes down. Monitor events like economic slowdowns, temporary company issues from financial newspapers, news and even creating Google alerts, to identify real buying opportunities…
How much to invest at first time
Start with less. This would help you to protect from huge loses. One should be able to identify the risks and rewards behind stock market investing to become a good investor. Read books from eminent writers like Philip Fisher, Benjamin Graham etc.. to add more knowledge to investment selections. My favorite guide is “Common Stocks and Uncommon Profits” by Philip Fisher, which provides enough knowledge on what to do and what must not do when investing. It also give sufficient knowledge on what should be considered when selecting companies to invest money. Grab a copy now itself and start reading if you need real wisdom on stock investments.
Critical investment Don’t
– Never invest money based on the word of broker, friends – Do your own home work- Never engage to day trading, short selling activities
– Read my previous article – Serious Investment Mistakes – to get the real knowledge on the most common and dangerous investment mistakes happening frequently.
More information required?
Comment your doubts here or send me mail on firstname.lastname@example.org (Please note, I never recommend fund or stock for anyone other than me to invest)