Investing in stock market : Top 10 tips and tricks for beginners

Investing in the stock market is an art. It is not a quick-rich scheme. It requires lots of hard work and passion. Sometimes it is difficult for beginners to understand where to start, what is the way to learn. Here in this article, I have shared some tips and tricks for the beginners, which will help to understand how to start trading in the stock market.

Investing money in the stock market is not a new thing. We invest and trade to grow our capital with time. Today's new-age technology is associated with online trading and analysis of a stock with its past performance and future prospect. Some people are interested in long term capital gain while others are interested in intraday trading. For the newcomers in the stock market, it is very difficult for them to decide what to do. How to manage their portfolio with proper risk management. Today's article is dedicated to the beginner who has just started or wants to start trading in the stock market.

1. Test your ability to trade with paper trading

Never invest or trade with real money for the first time without acquiring some knowledge and proper guidance about the stock market. Check your idea and implement it with paper trading. Nowadays there are lots of websites available for trading with virtual money. If you get success then only try with real money, otherwise you will lose your hard-earned money.

2. Never trade shares with someone's tips without having your own knowledge

You should not buy or sell shares with anyone's tips. Trade positions should be made if you have solid knowledge about it and you are confident about it. If your broker asks you to buy or sell something ask twice why you should buy or sell this share. What are the risks and returns to the possibility of this trade? If you are satisfied then only initiate the trade.

3. Never take a position of Overleveredged

Buy that amount of share or take trade positions in which you can take the maximum risk. Don't take an overleveraged position , because it may blow up your whole capital if the trade goes wrong.

4. Always use stop-loss during trading

All the trade positions you took might not be as per your assumptions, so you may face some losses. To minimize the losses keep a strict stop loss while taking a trade position. It is wise to trade with suitable stop-losses. Once trade goes the wrong system will automatically square-off the positions.

5. Trade with future and options very carefully

Trading with the future and options for beginners might be very risky. So for beginners, it is wise to avoid trading in the future and options segment. If your trade goes wrong you have to pay the MTM (marked to market) loss that is incurred by your broker.

6. Always invest in good quality stocks

For beginners it is always recommended to invest in good quality stocks. Index stocks (Sensex/Nifty) are less risky for investment. You should not buy the penny stocks at all.

7. Never buy stock in market news or rumors

You should avoid a stock which is in rumours and price is suddenly peaked due to news. You never know what is the exact reason, and maybe it is not good for it is better to avoid this stock for the time being.

8. Never purchase or trade shares with borrowed money

You should avoid taking loans for purchasing shares. Buy shares with whatever you have and with your own capital. If your own capital wiped out you will lose your own money, but if you purchase shares with a bank loan you have to repay that loan, and that will leads to sell your own assets.

9. Avoid short selling in the stock market

If you are a beginner and just started learning about the stock market, it is wise not to take short positions. Short selling is for professional traders, they can manage their risks but you cannot.

10. Always maintain a track record of your performance

You should maintain an excel sheet where you can track which stocks you bought and took a position. If you sold how much profit /loss you made. It will help you to analyze the health of your current portfolio.


Author: Umesh11 Oct 2019 Member Level: Diamond   Points : 20

A well written, informative and interesting article on stock market investing. Long back when I was in my prime I had some interest in learning the stock market investing and I did some investment in a very haphazard manner, the result of which was disastrous. That made me take a break and I thought that it was not my cup of tea. By that time the internet became available and I got some basic literature, just like this article, on stock market investing and again entered the field after a gap of 15 years. I could not make much in that second innings but was somehow able to retrieve my earlier loses to some considerable extent. I remained in the field for some time and booked some profit. Meanwhile, I got retired from the active services so I sold all my holdings and kept them in the bank to get some interest every month for my monthly expenses as I do not have a Govt pension. I want to share my take aways with the readers here.

1. Always invest in top companies and not only in one of them but many of them with some little money everywhere. Why I am emphasising this is because we do not know which company will doom tomorrow and if we stick to only one company and that is doomed then we are the loser. So if you have Rs 10 lakhs and A, B, C and D are the top of the chart companies do not invest all the money in one of them but distribute it in all the four in the proportion which you feel proper as per your judgement. Remember never keep all your eggs in the same basket.

2. The stock market is a very strange and mysterious place. Many people tell us that when they invest, it goes down and when they sell the next day it starts rising. It might happen but ignore it and do not bother. The stock market is not a place where people like you and me can make money in a few days or a few months. That gain, if any, will be eaten by the brokers for their commission only if you do that. Refrain from it. Invest for a long time horizon. There is one more reason to do that. Many companies announce right or bonus shares every 3-4 years over and above the handsome dividend they declare every year which is, of course, tax-free also. So investment for 15-20 years is a prudent time period an investor should look up to.

3. Do not gamble in the market. It is not for soft souls. Many things happen in the market and overnight people become paupers. Use your brain and wait patiently for the results. Stay invested in good scrips. Churn only when it is unavoidable.

4. The last point which I want to add is that share market is a high-risk investment area and many things like political situation, Govt policies and war type things can shatter it and the investor can lose huge amounts in no time. So invest only a part of your investable funds here and keep rest of them in a bank, Post Office, Govt bonds etc.

My aim is always to give good advice to the gullible investors in our country and this article has invoked me today to share my ideas for the benefit of all.

Author: DR.N.V. Srinivasa Rao21 Oct 2019 Member Level: Diamond   Points : 12

A good article from the author. He has given some good tips to the people who want to invest in the stock market. The stock markets business is like a dice game only. How perfect you are in predicting is the important factor. In a dice game also we require a lot of perfection and knowledge to know what may be the number that will be shown after the opponent throws them. Here chances of gaining or losing are almost the same.

When somebody wants to do this trading, they should follow the following points.

1. Don't keep all the money you have in Share business. The share value is very flexible. So we have to see how much money from our savings we can keep in this business and we should not go beyond that.

2. Never keep all the money in only one company shares. By any chance, something happens for that company and if the shares are losing its value, all your money will go into the gutter. So it is better to distribute the money into multiple companies.

3. See the track record of the company. These days almost all the companies are having their websites and they will be uploading all the financial records of the company on that website. You can open and see the dividend history, earning per share and how are the turnover and profits varying from year to year? Study these points before taking a decision.

4. There are many sites on the internet where they will analyse the company's performance and they will suggest whether to purchase, sell or wait. See different sites and study about the company in which you want to invest. If the reports are not favourable then don't go for that company shares.

5. Discuss with persons who are close to you and who are doing good trading and who are having knowledge in this area. Their suggestions will be very useful.

6. You can read various magazines in which a good analysis of various companies history of performance will be discussed. These articles will be written by the financial experts who know very well about the business. Following the suggestions of such people will be always better for you.

I have invested 10% of my saving in the trading business. I follow almost all the points mentioned above by me and by the grace of God, I have not lost money in this business and I made a little money also. I have a friend who is in this business and generally I talk to him before I go for a final decision.

One should be cautious always and they should understand that you can make money quickly and at the same time you can lose also.

Author: Sheo Shankar Jha31 Oct 2019 Member Level: Diamond   Points : 12

The author has endeavoured hard to pinpoints the details which would safeguard the hard-earned money of the investors. It would be wise to follow the suggestions enlisted in this article. The trend of the market would with respect to some shares is unpredictable and the forecasts of financial consultants may not match with the results of the companies causing a heavy loss of the investors.

There are a few points to be followed while entering into trade business with respect to shares and a few relevant tips are listed below-

1) Beware of such companies that have been listed recently because you may not be aware of the financial health and profitability of such companies.

2) In case of your intense interest in respect of investment in some portfolios, you need to go through the past records of the companies, its promoters and their areas of production and above all whether they are defaulters in repaying the loans to the banks.

3) Consumption pattern of the market is to be ascertained. This is applicable to most of the shares. Take the case of steel, where excess of dumping of steel from the international market may impact the productivity of our indeginious plants thus slashing their selling price of the product.

4) We should not be tempted to invest in such pharma products which have started production of late and our assumption of best performance in this sector will lead to disastrous result.

5) It would be essential to go through the financial magazines, papers like Economic Times etc so that we may get a whole picture of the company's performance and its current profitability. Such inputs may save us from any financial turmoil by way of wrong investments.

6) You may take the advice of the financial consultants engaged in the share market activities for at least ten years so as to avoid any losses in the area of investment in the share market.

Author: Jayesh Pawar19 Oct 2023 Member Level: Bronze   Points : 5

In my opinion, one must understand the difference between investing and trading. Investing involves rigorous analysis of economy, industry and the company from financial, legal, qualitative and quantitative aspects, the expansion plans of companies, their business model etc. In fact, I would say one has to look at the business like their own business. When you spend lot of time in understanding that business and then invest money in it then you give enough time for your investment to mature. When you understand business and give time to your investment, the risk automatically gets reduced.

In trading the decisions are taken basically of technical aspects of price, chart and the indicators for smaller movements. Here the risks involved are high because the decisions are not taken on the basis of fundamentals and the time available to execute the trade is also less. This availability of less time leads to higher risks.

The author of this article have given good insights but the subject focusses on investing and the content is focussing on trading. But still those are very helpful insights for beginners.

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