The Basics of Investing in Stocks: A Beginner's Guide | Globe Capital Market LTD.
  • 17-Feb-2023
  • Stock market basics

The Basics of Investing in Stocks: A Beginner’s Guide

The best way to describe the stock market was by the guru of Warren Buffet, who changed the perspective of many people in his days through his books like Security Analysis and Intelligent Investor. His name is Benjamin Graham, he rightly said about the nature of markets-

In the short run, the market is a voting machine but in the long run, it is a weighing machine.

We all begin our journey in the stock market with the motive of earning extra money through our hard-earned money. Initially, we all looked for stocks and mutual funds which have given the highest returns in the past one year and those are the stocks which have the highest votes and are the most popular among the analysts. This is the voting machine nature of the stock market.

We want our newbies to know things which rise fast, fall fast too. Thus, we want you to have the approach of seeing the market as a weighing machine. This means looking for avenues which give decent returns for a long period of time and let the power of compounding do the magic. As an investor, time and patience will be your weapons. If used properly, you will be sitting with a heavy weight on weighing machine.

Now the first step to entering the market is to open your own D-Mat account. We at Globe Capital provide the service of opening a D-Mat account very easily. Please use this link.

The next step is to understand various avenues of the stock market where you can start your wealth journey. These are a few options: -

  • Equity Shares or Direct Equity: Companies listed on the stock market issue their shares or equity on the secondary market for investors. These shares entitle you to be called shareholders of a company and regular payments of dividends.
  • Bonds: These are issued by companies and governments and have a fixed nature of payment. In simple words, these are loans given out to companies and governments where the investors get fixed returns through interest pay-outs.
  • Mutual Funds (MFs): These are issued by financial institutions like Asset Management companies (AMC). MFs are vehicles to pool money from individual investors which is then invested in various financial instruments like stocks, bonds, or other securities. The price of a mutual fund is referred to as Net Asset Value (NAV). It is a representation of the total value of a portfolio divided by the total number of shares. If ₹1000 is invested in 10 shares, then NAV for the mutual fund will be ₹100.
  • Exchange Traded Funds (ETFs): These are instruments for those who want to just want to replicate the performance of the overall market. ETFs are replicas of an index like the NIFTY or the SENSEX. Buying a unit of the ETF, means you are holding a part of the 50 stocks in the NIFTY in the same weightage that the NIFTY holds them. These products have a very low expense ratio as compared to mutual funds.
  • Derivatives: These are contracts which derive their value from the performance of an underlying asset or asset class. These derivatives can be commodities, currencies, stocks, bonds, market indices and interest rates. These are complicated products and should be used by professional people.

With the current technology and advancement in the stock market in terms of variety of financial products, anybody with a small sum of money can start their journey. The market rewards everyone who is ready to learn from their mistake and make volatility their friend.

We hope you have a safe journey in the stock market and all your financial goals are fulfilled.