Stock Investment Basics

Guide to stock market investment for beginners

Stock investment is a method of investment in organizations. A stock market is a place for the buying and selling of the stocks and finding a suitable price for the same. However, before we dwell on the subject of share market investment, it is necessary to understand that the same is a method of valuation of the actual price of a share in the market. Such an investment is an ideal opportunity to gain long term wealth management options. 

It is important to understand that the investment in the stock market is risky, yet the same may yield profitable with the help of adequate financial planning experts. There are options for being a common or preferred shareholder on the basis of ownership in the company. Thus, if you want to make the investment in the stock market, it is important to understand the basic types of stocks and the market fluctuations and regulations for investing in the market. 

Equity as a risk assets 

One commonly heard statement is that equity is a risky investment. The term high risk is used to denote that the returns or the earnings on the instrument are highly variable (or volatile). On the other hand, the bonds are a secure investment in comparison to the equity instrument, as these bring earnings in the form of regular interest after each quarter. 

The stocks are volatile instruments, and the prices for these changes regularly resulting in a little assurance of constant or steady returns. The price for the stock is thus dependent on factors like - the impact of economic forces, industrial factors, or internal reasons. However, the results of the investment are highly erratic yet more rewarding than an average investment source. All such stock related transactions are regulated by the Securities and Exchange Board of India. Similarly, the important stock markets of the nation are the National Stock Exchange and the Bombay Stock Exchange.

Stock Market investment- Getting the basics right.

The share market is based on the mechanism to calculate the risk involved in a particular asset investment. Thus, some stocks have higher P/E investments, which means there will be lower risk and vice versa. The stock market is not a measure of the risk of the assets yet also the method to distribute the risk by allocation to higher return seekers. 

Equity market is for long term investment avenues.

With stocks, one needs to be highly patient to earn favorable returns on the investment. It means that you may earn huge returns in one year and maybe nothing in the next. Typical returns on the equity are above average only if held up for longer periods. To make such a case, the 4-5 year holding period is important. 

Rights of shareholders

Being a shareholder means that you have made an investment into the company or a part of its stock ownership. As an equity shareholder, you may have specific rights to make the right choices for the company. Likewise, being a part-owner doesn't guarantee higher returns or dividends. Such a case will happen only if the company is able to secure profit. 

Understanding the bullish and bearish trends

Bullish or bearish are jargon used to describe the upward and lower movement of the stock. The rise of 20% or above is seen as a bullish trend while a similar decrease will be considered as the bear market. Such trends decide on your investment strategy. 

Stock markets today are ideal wealth creators. For example - the first-year post-purchase may make earnings similar to that on a bond. However, for a period beyond five years, you may expect good income from the stock held. 

Furthermore, the markets are regulated by the right margining system. Even trades today guarantee that the exchange process has removed the issues related to trade defaults.

The stock markets give wider choices related to the investment in the stock market and market caps. One can seek out investment in the large, medium or trade two stocks -

  • Large Cap stocks - These include companies that are well-established and have a strong market presence in the economy. Investing in these companies is less risky for investors. 
  • Mid-cap stocks - These companies have the potential to grow in the future, but yet these carry heavy risk at the moment in comparison to the large stock companies.
  • Small stock companies - The upcoming companies or startups are part of the small stock companies that carry a high risk in comparison to the above two categories. These have the potential to grow up and get high returns. 

Check out the share market live and generate a good income from the share market.