A Step By Step Guide On How To Invest In The Stock Market

Step 1 – Set Stock Market Trading Objectives

First and foremost, you must know why are you investing? What is the objective? Next comes the question of whether you are capable of investing the money and taking risks. You may have a strong intention to dive into the stock market, but if you do not have the money to make it happen, then nothing would really materialize. Once you have gathered this basic premise, you have to set the goal. You will have a better idea of the expected earnings based on the investment amount and goal.

Step 2 – Study the Stock Market

After setting their trading goals, you must move on to familiarize yourself with the mechanics of the stock market. Learn the fundamentals and the important components that drive stock trading. Before advance to the next step, make sure that you take help of someone who has a firm grasp of the concepts involved in stock valuation, like a registered investment advisor. The better you become at valuing investments, the better becomes your portfolio. Once you have adjusted your objectives according to the risk tolerance, you can carry on to the next step.

Step 3 – Set-up a Brokerage Account

There are some brokerage houses which take commission on each trade, while there are some other ones which take a fixed fee for each trade and they are called discount brokers. However, if you decide to buy securities that do not need a broker like common ETFs and index funds, all that you need to do is set up an online account to manage and fund your investment. Register through the right website and deposit funds so that your account can go live.

But if you want to buy stocks, avail brokerage service that aligns with your specific financial capacity. Brokers offer several services and come in a variety of price ranges. Take note of their package inclusions, commission rates, and other maintenance costs. You can choose anyone, discount broker as well as full time brokers, depending on your requirements

Step 3 – Stock Picking

After you are well acquainted with the essentials of stock trading, you may pick a stock to invest in. Picking a stock to invest will mean further research. When traders pay attention to finding the best-valued stocks, they increase their capitals and gain greater chances. Investment research is a trader's way to minimize losses at the right time.

This requires in depth knowledge and study about stocks, which includes various parameters like valuation, balance sheet of the company, face value, liquidity etc.

Step 5 – Activate account and Place an Order

This step is the actual buying phase. Now that you have a broker and a demat account, all that you require to do is fund your investment account. Using a trading platform, pick out stocks by entering the company name. Find out that the particular stock is traded on which stock exchange.

Check the stock price and then enter the number of shares you want to buy. Some people make an error in this step by mistaking stock price with the number of shares. You then need to finalize the price as well as the quantity and then instruct your broker to proceed with the transaction.

Step 6 – Wait for The Transaction to Push It in Trade

After you place the order, the transaction will be reflected in your portfolio if the order gets executed. Keep updated with related economic news and business reports so you can formulate the follow-up investment decisions. Will you buy more stocks or put sell the previous one? The next move will depend on stock market trends.

Step 7 – Plan Next Purchase

Buying one investment is a start. To buy more securities and to diversify your portfolio is the goal of a prolific trader. Look out for chances to invest in a variety of financial instruments. With this strategy, you can minimize any potential losses in your portfolio.

The financial markets are very volatile and uncertain. Trading in the financial instruments in the market requires immense knowledge and experience. If you are new to the market and don’t have the requisite experience, it is better to take help from a certified investment advisor who can help you in planning your trades. Once you have gathered some knowledge and experience you can try placing trades on your own.

There are various risks associated with almost every segment of the stock market. The value of your investment can go up or down in a matter of time. It is very important to know your risk bearing capacity before you invest in stock market. A risk profile analysis helps you in having an in depth understanding about the risk bearing capacity. Your investment advisor can help you in getting your risk profile analysis. But you should always remember that the risk profile analysis depends on a number of factors including your assets, liabilities and your age too. So, an updated risk profile analysis should be in place before you invest in the stock market. There are various investment advisors who can help you by providing a free risk profile analysis. Once you are done with all the above steps, you are ready to start your journey in the stock market as a trader or investor.

Happy Trading!