Stock Market has been the stepping stones for many millionaires or billionaires around the world. They either invest in the stocks or list their Company on the Stock Exchange. These, hence, become the only two ways to become extremely rich. Before the actual execution of stock trading, a beginner is recommended to fully understand the basics of share market.

Veteran Investor Warren Buffet

Along with this basic stuff, a beginner is expected to go through some important tips and precautions that need to be inculcated which comes to be very helpful during the complete journey.

Without any understanding or learning of the stock market and how it works, it is simply foolishness to go forward and play with your hard earned money.

Anyways without any further delay let us get straight to the point on How to Invest in the Stock Market for Beginners?

Why do you want to invest or what are your requirements from this?

Everyone has their own varied requirements. Identification of the same is a vital part. Some people want more returns in lesser time while some are followers of Warren Buffet and strongly believes in Value Investing.

Of Course, the first priority is for the relatively higher returns but how much is the risk aversion factor? This needs to calculated depending on your income and expenses. From the savings left, how much is available for Investing?

Normally people always prefer to trade with 10% of the total amount and do investing with the rest amount. There are also people who want more returns in a couple of months or weeks or even in a day.

Identify in which column you fall in.

Following an Investment Strategy

Planning is the key. Foreseeing the likely errors or problems which may occur and preparing accordingly is the right way to do things. Strategies and techniques play an important role in investing.

Do you want a Dividend paying Company or a Multibagger? What about the share price and the lot size? How to put in money: All at once or in small packets?

Make your own strategy and apply it. Also, do look to learn for some strategies used by experts and understand them thoroughly. Sticking to the strategy makes money.

Entry Point

Select a good potential stock which is currently undervalued. To check for if it is really undervalued one needs to know the actual value of the stock which can be done by calculation of intrinsic value through multiple methods. Look for which method is apt for the particular stock like for some dividend-paying Companies, the Dividend Discount Model is used.

Select a good potential stock which is currently undervalued. To check for if it is really undervalued one needs to know the actual value of the stock which can be done by calculation of intrinsic value through multiple methods. Look for which method is apt for the particular stock like for some dividend-paying Companies, the Dividend Discount Model is used.

Check if the Market Current Share Price is lesser or higher than the Intrinsic Value calculated. If it is lesser then it is undervalued by that sense. Purchase it when it is below the intrinsic value.

Portfolio management

Source: Trendlyne

This also includes the exit point of the stocks. Diversification is mostly used to reduce the risk aversion factor. If one stock goes down, then too investor’s portfolio is still in positive because of other positive stocks.

Depending on the return requirement and conditions revolving around the stock/stock market, we need to be highly precocious about the upcoming prices of the stocks. Hence, the Exit point is decided considering various different entities.

Before thinking of returns, investors and traders should focus on protecting their Principal Amount and undergoing very minimal loss if any.

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