We have gone through many finance articles on Quora for getting to know Content on Quora for Share Market Beginner. We tried many stock market for starters books also. Somehow the Finance Books seems to be either with very heavy contents or written in a more complex manner. Ultimately those were not useful from an Indian Investor who is a newbie and just starting out in the market.
In this article, we will explain you in depth the basics of Indian Share market and its related terms. Before delving into anything basics are like the roots which keep the tree hold the ground. But do directly indulge with the Share Market in the naive form following the human quality of greediness. They develop envy seeing their peers make money from this same market. People do think why don’t they too start investing and start earning some real money! They do it without knowing even the basics clearly and unfortunately lose all their hard earned money in vain.
We are humans and our brain is made to do one process at a time. So let us start first by understanding about “Shares” then “Market”. We do understand it seems little overwhelming for
Let us take up an example here, assume 2 friends going to a mall in search for jeans which are on sale like “Buy 3, Get 2 Free”. Unfortunately, 3 Jeans costs Rs 6000 and they have only Rs 5000. Now they are bit disappointed as they don’t enough money to purchase the jeans and get 2 more. An idea strikes in the mind of one friend that he can ask some other friend to invest Rs 1000 and he will be given 1 jeans in return. Voila! What a deal! Who would leave such a deal? They got the money from some other friend, got 2 extra jeans. One for them and one for the third friend.
Here the third friend is “YOU” or “Investors” and the 2 friends are the Publicly listed Company. You invest some money in it, when the Company needs finance for their business expansion and comes to public by putting an IPO(Initial Public Offering). A Company comes in an IPO when it needs more money than the money they already have. They get it from the general public who gets to invest in the Company by purchasing/investing the shares of the Company. You become a shareholder of the Company. Glad moment for you!
Like in the jeans case, here We cannot assure you will be getting assured returns without we know the rationales behind your investment.
As it is Clear what are shares, we also need to understand where can we get the shares. Like we purchase foods and essential commodities from a marketplace, Shares are too purchased from a market known as “Share Market”.
Share Markets are mainly of two types:
1. Primary market
2. Secondary market
A Primary market is a place where the shares are issued for the first time, as we have already discussed an IPO. While the secondary market is a stock market where we can do the trading (buying and selling) of the shares.
As we dive deeper into Share Markets, we need to know (from Indian POV) there are various exchanges where these shares of the Public Companies are listed with their respective prices. In India, there are many Stock Exchanges, but the 2 largest ones are:
1. NSE(National Stock Exchange)
2. BSE(Bombay Stock Exchange)
BSE was established in 1957 while NSE was formed in 1992. BSE is a conventional Stock Exchange with a trading floor and operating through mostly offline trades but NSE is a completely online Stock Exchange. Now as generations have passed and various technologies have taken stand BSE also do have online trading now, albeit it still has an offline trading facility that is carried out at the trading floor of the exchange at its Dalal Street facility.
You will need to open 3 types of account.
1. Savings account
2. DEMAT account
3. Trading account
The DEMAT and Trading account can be opened with the help of a broker. You take your hard cash put it into Savings account, transfer it to your Trading account. You put a buy order, the respective money gets deducted from the Trading account and the Shares(electronic bill) get deposited in your DEMAT account which is a proof that you hold that much amount of shares in that particular Company. So it is as simple it is!
Let it be a BUY or SELL, one needs a broker intervention to do it. That means I pay the broker, the broker purchases on behalf of me and gives it to me. This is just to make sure there is no transparency of who is buying or selling. Else we get to know what the Fund Managers and Great Investors are buying/selling, we will simply have followed them and they can even misguide us at even times for personal benefit.
So, there are broadly two types of brokers:
1. Traditional Brokers
2. Discount Brokers
Traditional Brokers are the one who along with share buying/selling, also offers guidance on Investment or Finance strategies, Research, and news. And they charge more compared to the other type of broker.
Discount brokers are the online brokers are the one who compared to full-service firms, have reduced Commission charge and hence most preferred.
(Please note: Here we have explained taking the example of only one type of asset class which is an “Equity”. There are many more Investing instruments like Derivatives, Bonds, Commodities, etc.)
This is just the get-to-go kinds of stuff one need to understand as the “Basics of Share Market: Beginner level”. You need to learn more and more, practice with strategies and analysis, initially with low investment. Understand Mr. Market. Understand the Business and the Industry you are investing in!
Along with the technical knowledge and understanding, Psychological Investing Aspects also do play a vital in Investing. People panic when stocks go low, even if they have done got amount of research before investing.
Control greediness. Learn. Have patience. Be well prepared and equipped before fighting any battle in life.
To learn more about Stocks and Stock Market. Connect with us, We’ll ensure we help you as per your needs. Here is an Indian Trading & Settlement Cycle article which can be referred to as a next level to this article.
We do understand it seems little overwhelming for any share market beginner but before delving with anything we need to first learn it. Being naive is alright, but being null is not. Basic understanding of what is going around is a must.
Learning can be done through any source but nothing suffices more than self-study. Here come “Books”, our best friends. The huge source of knowledge framed by veterans. What is needed more than this, Fella?
Pulling out 7 books out of more than a million books is like learning only a few chapters for the exam. But Yes! We are pretty sure you will be getting the essentials with these books to cement your foundations in Indian Stock Market environment. After you read all these share market beginner books, you are ready-to-go.
Though the priority of the books is set by our own, Let’s take it from the bottom of the list to the top, it feels good to keep up the curiosity, am I right? 😉
Here is the watchlist you should look for:
7. Thinking fast and slow by Daniel Kahneman
A Masterpiece, we must say!
The book helps the reader to make him/her understand that the current you is not the actual you, you really can be. We act stupid when we are in a hot state i.e. in hurry, sick, tired etc. We make wrong decisions without giving much of a thought. The Book talks about mainly two systems which are inbuilt in our brains. We end up most of the time using the wrong one.
Now why this is important for you?
Self-controlling is the key. You should develop some good decision-making skills from this book so that you should not panic when the Market goes down!
6. Rich Dad, Poor Dad by Napoleon Hill
As the title goes, this book certainly reveals it. The secret behind what the rich do to accumulate wealth and grow richer is published here.
Over the years, rich become richer and poor stay poorer. This is not because they don’t earn money as the rich, but they don’t actually know how to use that money and where to use it as well!
For the Investors, the understanding factor should be the importance of Investing in Money generating assets.
5. Fooled by Randomness by Nassim Nicholas Taleb
“All models are wrong, but some are useful” quotes Mr. Taleb perfectly.
Be an Investor or not, this is more for everyone out there.
We always get fooled by the random activities happening in front of us and we baselessly conclude things.
As a share market Investor, You should be able to level-up your decision-making skills after the book read.
4. Common Stocks & Uncommon Profits by Philip Fisher
Warren Buffet says he is 85% Benjamin Graham and 15% Philip Fisher.
This is more of getting into the meat, reaching the bone of Investing.
The author tries to bridge the gap between Value Investor and a Growth Investor.
3. The Intelligent Investor by Benjamin Graham
Certainly, the starter to Investing by the Guru of Warren Buffet and the Father of Investing himself – Benjamin Graham.
In this book, you will find lots of observations made by the author and relevant conclusions. It may appear to be dry and less entertaining. Learn basic wordings of the Stock market before you make a read or give a try yourself and realize the same.
Multiple reads will help the reader to completely understand the views of the author about Mr. Market.
2. One Up on the wall street by Peter Lynch
Peter Lynch had a great success in his career as a Fund Manager at the US Mutual Fund Company, Fidelity. In this book, he has explained his simple way of stock picking which can be applied by anyone.
The author takes the reader through the unexplored regions of our brain. We then start notice things more clearly.
This seems to be an almost complete book for the share market beginners, but it will help only after multiple regular reads and understanding.
1. Little Book Series for Investing by Multiple Authors
We would strongly recommend the Little Book Series for every share market beginner.
Each Little book has a learning attached to it which can be extracted in a relatively lesser time, obviously as it is small in size to other Investing books. The Authors of each book are well known all-time Veteran Investors.
Here we provide you with the best share market beginner little books out of the little book series:
The Little Book That Still Beats the Market (Old Edition) by Joel Greenblatt
The Little Book of Bull Moves in Bear Markets by Peter D. Schiff
The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere by Vitaliy N. Katsenelson
The Little Book of Value Investing by Christopher H. Browne