How to Invest in Stocks Online?
How is investment different from trading? The intuitive response would be to say
that trading is short term while investing is long term. That is substantially correct.
The bigger takeaway is that the skill-sets required for investing are quite different
from the skill-sets required for trading. As an investor, your focus is more on
identifying stocks that can give higher returns.
How to invest in stock markets is all about patience, research and identifying the
big shifts in opportunities when they present. You can use your online trading account
for investing in shares just as for share trading. Your online trading account can,
in fact, become your gateway for investment in stock markets. Let us understand
the 4 key requirements of online investments in the stock markets.
Focus on Researching Companies for Big Investment Ideas
Buying and selling shares for investment is the same as trading shares. What differs
is the logic behind investing. Investing is all about taking an elaborate view on
the financial and non-financial aspects of a company and then deciding to buy or
sell a stock. Your broker will definitely provide you investment ideas for creating
alpha in the market. But, it is always advisable that you also do your own research.
Equity investing is all about catching hold of a good idea and then holding on to
it for the long term. For example, if you had invested Rs.10,000 in Wipro in 1980,
then even if you had done nothing to your investment, it would be worth Rs.450 crore
today. That is the kind of wealth creation that equities can provide you if you
have the patience in the right stock.
Focus on Trend Shifts and Disruptive Changes in the Industry
Your best of investments may go awry if you do not monitor the trends and the underlying
changes in the industry. For example, Nokia was a world leader in mobile phones
Over the next 5 years, the company came to the verge of bankruptcy because it did
not anticipate the impact that smart phones of Apple and Samsung could create. Even
if you are invested in a stock, keep looking out for major disruptions that could
have implications for your investment.
Focus on Short-Term and Long-termInvestment Opportunities
Online stock investing is surely not only about the very long term. Not everyone
is thinking about the next 40 years; so you also need to focus on short term opportunities.
For example, large stocks like Hindustan Unilever and Reliance have given returns
in excess of 50% in the last 1 year.
That is the kind of returns that are really worth playing off if you can be at the
right place at the right time. Essentially, your investment focus should be short
term (6 months to 1 year), medium term (1 to 5 years) and for long term (above 5
Monitoring your Investments is Important too
Remember, when you invest in a stock it is not a stand-alone decision. You are actually
investing in a portfolio of stocks. Hence monitoring has to be done on a continuous
basis of your investment holdings.
What is the return that the investment has generated in the last 1 year? Has the
price appreciation increased the exposure to a particular stock or sector? Is the
portfolio diversified enough? These are all important questions that you need to
In terms of execution, there is not much of a difference between your online trades
and your online investments. But an online investment is more for long term wealth
creation and hence needs to be constantly monitored against your objectives.