The past decades have seen steady growth in the popularity of stock market investing. However, the variation in the market remains an area of concern. These variations could seriously impact your portfolio if you are a beginner and intend to invest funds in the stock market. You may even face losses unless you trade with a tactic.
Joseph Scott Audia states that the stock market is a platform for companies, exchanges, and investors to list, buy or sell different securities such as derivatives, equities, bonds, mutual funds etc. Usually, it comprises several stock exchanges, either formal or over-the-counter (OTC) that eases such transactions with the listing of financial instruments.
One of the most confusing features of stock trading for beginners understands the investment horizon, which is the period they are eager to hold their investments. Usually, there are two investment horizons: Short-term and Long-Term. Here is the variation between the two:
- Benefits of long-term investment: Long-term investment, also known as value investing, is when you purchase securities to hold them for multiple years. Long-term investments make sure that you mitigate stock market risks as they increase over time. Such investments offer the best value of securities to the investors as the extended period augments the potential for better profits.
- Benefits of short-term investment: A short-term investment is when an investor purchases securities to sell them within three to four months. They permit you to make fast profits in a market and enjoy the profits for personal advantage. Here, investors do not have to hold their money for a long time in the stock market and yet make profits if the costs of the securities increase.
Both investment types are perfect based on the investment objective. If you want to make fast profits and have a high-risk appetite without keeping the invested money for long, you can look toward short-term investments.
On the other hand, if investors do not want to take on high risks and invest methodically for the future, you can think about value investing. But, a mix of both can be an ideal tactic to know the share market as a beginner.
The process of how to invest in the stock market for beginners also includes understanding the process of buying and selling securities. Following is a guide on how to invest in stock market for beginners.
- The first step is to select the investment type among multiple available options such as mutual funds, stocks, derivatives, bonds, etc. It is better to know each option before deciding.
- A Demat account is essential to hold your securities in electronic form. Thus, before investing, it is compulsory to open a Demat account. It is wise to compare and analyse different stockbrokers before selecting one to open a Demat account.
- Researching the selected type of investment is essential to alleviate losses and improve the profit prospective. You can research and study the selected security through TV channels, newspapers, or information available by the stockbroker.
- You must make investments in stocks or other investment products after setting an investment goal. The objective will ensure you choose an ideal investment amount, investment horizon, security and risk appetite.
- After you have invested in a security based on an investment goal, it is essential to monitor the portfolio regularly. Monitoring helps in understanding the performance of your investments, decreasing losses and identifying stocks that are doing better for further investment.
Joseph Scott Audia says that the stock market goes through regular changes that increase or decrease the cost of listed securities. It is necessary to understand the direction of the market by staying updated about the current happenings in the stock market. It can allow for better decisions regarding present and future investments.
