How to invest money in stocks – 10 steps approach
Investing in stocks is an art. Every investor wants to grow their money. However, fixed income investment options like bank fixed deposits / certificate of deposits, corporate deposits etc. would not provide an opportunity to grow the money faster. One of the best ways to multiply and yield high returns is to invest money in stocks. There are several investors who invest money in stocks and later blame that it is not their cup-of-tea and lose the money. This article provides 10 steps approach on how to invest money in stocks and gain in the long term.
How to invest money in stocks – 10 steps approach
1) Save money to invest in stocks: First you need to save money to invest in stock market. Do not invest by borrowing money. There are various ways to reduce your expenses and save money.
2) Define your goals before investing: Whether you have short term goals or long term goals, define them upfront before you invest your money in stocks. This step would give you direction in which stocks you need to buy.
3) Open an online trading account with any stock broker: There are various stock brokers with whom you can open online trading account and start trading. Consider registration fees, commission to pay on buying or selling stocks, annual charges etc before you choose a stock broker.
4) Understand the basic concepts of stock trading: Understand the basic fundamental definitions used in the stock market before stepping into this ocean.
5) Do not consider tips / television news: If you are new to investing in stocks, you would have been attracted with lot of stock tips on websites, SMS messages, televisions etc. while these can be considered for update purpose, you are the final decision maker in choosing the stock. You can visit our article on how you research a stock with various parameters.
6) Build a portfolio of 5 to 10 stocks: Investing in blue chip stocks or large cap stocks always gave good returns over a long term. Build a stock portfolio of 5 to 10 such stocks for investment.
7) Invest money which you do not require for 5 years: Investment in stock is like an investment in company. You cannot expect immediately results from your investment. Hence do not invest money which you may use in < 5 years time frame.
8) Invest regularly and systematically: Do not invest in one lump sum amount and wait for it to grow. Warren buffet principle says “buy when others are selling and sell when others are buying”. Invest regularly and grab the opportunities in bear market.
9) Leave the investments to grow for long term: Once you have started investing in the portfolio you built in, leave these investments to grow for 5 to 10 years timeframe.
10) Track the portfolio and make changes if required: In some of the investments, it may be required that our assumptions were wrong and you need to modify your portfolio. In such situations, do not HOLD till you ruin your investment. If you feel it is a mistake in identification of stock, sell it even if you incur loss.
Conclusion: Investment in stock market provides ample opportunities for investment to grow. Following simple steps on how to invest money in stocks would provide higher returns in the long term.
Readers, what your opinions about these steps on how to invest money in stocks? Please give your comments
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Hi Suresh Sir,
Nice article. Sir for small investor with amount of 3-5 thousand per month which option is better mutual fund or stock market. Minimum how much amount required to invest in stock market regularly per month.
Vikas, It depends on risk appetite. If you are high risk investor, you can choose investing stock market. However you need to have good experience in handling various market cycles. For monthly investments, SIP in large cap and diverisified mutual funds would be best option.
I would like to invest the 10,00,000 money over stock market ,But "I don't know about stock market",every one told me its loss of money to invest stock market, so please help me to consult better person who guide me to learn stock market,My number is 8891134806.Thank you.
Nadeem, Giving your contact to a broker is easy, but he would charge you and you may not beneift in just a day or two. My suggestion is go thru online tutorials at ICICI Direct or any other website about stock trading and learn about various aspects in stock market.
Thanks for the great article Suresh!!
It's really helpful for the beginners. I'm also new to online trading & have a demat account with Geojit BNP Paribas.
Recently I came to know about NSE mobile app which allows to do trading right from your phone with live stock updates which is far better than Geojit Flip mobile app.
I have installed NSE mobile app on my android phone.
Market data works fine but when I go to the trade option, It asks for "MEMBER ID" & "USER ID"
I wonder where do I get this Member ID & User ID from.
I called the NSE toll free number but they themselves are not aware of this.
Any Help would be highly appreciated.
Thanks in advance.
Hi Nadeem, It would be difficult for me to talk about how you can run a iphone app which you have downloaded from you iphone 🙂 No doubt, it could be a good software, but check with concerned company from where you have downloaded.