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How to Invest in the Stock Market

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How to Invest in the Stock Market

The terminology of the stock market is described as here: 

What is the Stock Market? 

The Stock market is an arrangement wherein equity shares of companies are bought & sold by the participants (they can be traders and investors). Traders mainly have to earn profits by tapping into a small change in the prices of equity shares which somehow last for a few minutes to the whole trading session. Investors, however, have a long-term horizon in mind & benefit from capital-appreciation over the given time.  

In India, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the major platforms where stock trading is done. The orders are placed through brokers preferably using online trading services. The settlement cycle follows the ‘T+2’ format – The trades are executed on Day 1 & the participants receive their sales/shares proceeds after 2 working days from Day 1. 

Stock Market Terminology? 

Stock market terminology is related to industry-specific jargons specifically used in the stock market on a regular basis. Even the amateurs and experts use these terms frequently to explain indices, stock market patterns, trading strategies, and other components.  

Investing in Stocks? 

Equity markets can sometimes turn out to be puzzling & investing in multibagger stocks end up putting budding investors in a dilemma. There are chances when the market price may or may not reveal the reality check about the company. It might be selling cheap because of being over-valued or it could be worthless to buy it. Talking about the different scenario, a stock might be selling at a high-price because of over-expectation from the investors or it can be a skewed fundamentalTherefore, depending only on market-price for selecting a stock might put you in trouble. Try not to be impulsive and look forward to finding out the real-worth of the stock.  

Study and analyze the fundamentals of the company in detail before investing in stocks. Doesn’t matter if you are from a finance background or not, keep an eye regarding the same. Start the analysis with company’s financial statements. It’s better to venture into markets and sectors which you know like the back of your palm, thus giving you a competitive edge over un-informed and naïve investors.  

Picking multibagger stock 

  • Whilst looking for growth stocks, there are chances where you might come across stocks which are selling at low-cost & others are expensive. It’s reflected in the price-earning ratio of the stock. A stock having a low-price earnings ratio might be attractive, but before you jump on any conclusion try to figure out the reason for the low.  
  • Relying solely on financial ratios and quantitative data might be inadequate, reason being, they simply indicate past-performance which may or may-not be repeated in the future. Prefer to opt for a holistic analysis by incorporating qualitative aspects. 

Takeaway   

Whilst venturing into stocks, don’t fall for anyone else’s advice. A deep analysis is required before investing.  

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