Our presumption is that trading in the stock market can lead to the accumulation of short-term wealth. That is far from the truth. According to a study, nearly 45% of traders end up making losses in the stock market due to a lack of knowledge and clarity. SEBI also mentioned that 90% of the traders dealing with equity F&O incurred an average loss of ₹1.1 lakh.
Well, this is what happens when people get swayed by influencers, indulge in tips, or are not aware of what they are getting into. Investor education can’t prevent losses, but it can reduce the risk and vulnerability of facing a loss. Shooting an arrow in the dark only works when you are lucky.
Here are important things that you should know as a beginner in the stock market:
Get a Demat account:
Open a demat account with a reputed and well-known broker to help you trade. Please take into account the downtimes that they may have, any glitches, the responsiveness of the customer support team and the onboarding process before you start investing in the stock market.
Follow the markets:
If you are looking to trade regularly, follow the market. Understand how SGX Nifty impacts the moments in Indian equity markets. This will allow you to cater to better decision-making while trading in the stock market.
Invest for the long-term:
When you are new to investing in the stock market, you do not need to experiment with trading frequently. Pick out some stocks at a good value and invest in them from a long-term horizon. Long-term investments require patience, but they give the best results due to the compounding effect. Warren Buffett and his investment approach for Berkshire Hathaway is the most prominent example of this.
Educate yourself:
Learn about how the markets function. Understand the jargon, charts, sentiments, and how people think. Read and understand financial reports, how positive/negative a company’s vision is, valuations, and books of accounts. Making informed decisions based on understanding will help you a lot. Half-knowledge is dangerous and will only erode your wealth. Investing in the stock market can be something other than a zero-sum game if you know what you are doing.
Remember stop loss:
Stop loss helps you exit a stock at the risk appetite you can afford. If you do not add stop losses to your trades in the stock market, you can get caught by surprise,
Talk to an expert:
An expert can help you understand the stock market in a better way. They can help you clarify doubts, share their learnings, and guide you about mistakes that you can avoid.
Conclusion
As a stock market beginner, going unprepared will hamper your investment journey. Prudent and informed decisions are rewarded with long-term results. Investing in the stock market involves risks. Come to terms with the risk appetite you can afford, and then make some trades to prevent failure.
