If you are new to the stock market, the idea of buying shares in a company that supports the market itself may sound intriguing. Many beginners begin their research by searching the NSDL Share Price after hearing about its high-profile listing. Others start by studying the CDSL Share Price because the company has a longer trading history. Whichever route you take, a simple and structured roadmap will help you proceed with confidence.
Step One: Build Your Financial Foundation
Before you start buying any stock, secure the basics. Set aside an emergency corpus that covers your major expenses for a couple of months. Get proper health insurance and term life insurance if you have dependents. Pay off your credit card dues.
Once you have done all this, you can think of investing in equities. Investing without any safety net can force you to sell your winning shares at a loss in case of an emergency.
Step Two: How Depositories Work
Spend some time understanding depositories. A depository keeps the electronic record of all the shares that one owns, facilitates the transfer of shares after trades, and also handles dividend payments, bonus issues and share splits. A depository interacts with depository participants such as brokers and banks to get this work done.
By knowing this, you can understand how the business earns money and what factors can affect its growth. You must read the investor presentations and annual reports put out by the companies to get an idea about the business.
Step Three: Set Goals and Time Frame
Think about how you want to invest. If you have a seven- to ten-year time frame, it will help. If you want to make money in a year or two, it will not help. Similarly, one must decide the percentage of the portfolio one wants to expose to a particular theme. One must also decide how much one can afford to lose on a theme. A beginner can start with a small percentage of his equity portfolio in a theme to limit exposure.
Step Four: Do Analysis
Look at its revenue, profits, return on equity, dividend payouts, valuation and compare it to its own past performance and to similar companies. One must not get attracted just because there is social media talk about a stock and it goes up on one day. One must make a memo to oneself about why one wants to buy the stock, what risks one is taking and what the exit triggers are.
Step Five: Buy the Stock in Parts
Instead of buying the whole quantity at one time, buy the stock in parts over a period of time. This is called rupee cost averaging. One should also choose a reliable and well known broker and ensure that he has put in two factor security in his account. The investor must keep his user id and password secured and not share it with anybody else.
One must check the brokerage charges, demat account charges, and taxes that apply to his transactions. Long term and short term gains are taxed differently and this must be kept in mind while buying and selling.
Step Six: Monitor the Investment
Check it after a certain period of time and not get shaken up by minor movements in the stock. The investor must relook at his investment decision every quarter or six months after the results are declared. It is important to track any changes in government policies, changes in taxation, and any other news that might impact the investment.
Do not get excited just because there is a good news out of the company or vice versa. Do not take any calls based on assumptions.
Step Seven: Keep Learning and Diversify
Read up on investing and do not get tempted by fancy pitches. Subscribe to financial newspapers and magazines and go through investor awareness programs organized by exchanges and authorities like SEBI.
One must diversify one’s portfolio by investing in different sectors like banking, technology, healthcare, consumption and infrastructure. One can also look at index funds as a core investment and stocks as a satellite investment.
Final Words of Encouragement
Investing is a perpetual process. One must keep learning and updating oneself about the developments so that one does not take unnecessary risks. A novice investor will always make better returns by being a slow and steady investor and not take undue risks and also learn the art of patience.
