Investing in the stock market is easier than beginners might think all you need is an online brokerage account to get started.
Many people put off investing because they think investing in the stock market needs a lot of money to start. But, this is just not true. You can just start your investment with little money as Rs. 500($7) per month.
Investing in the stock market is an excellent way to grow wealth.
For long-term investors like me, stocks are a good investment even during periods of market volatility a stock market downturn simply means that many stocks are on sale.
Here is a blueprint to Invest In Stock Market With Little Money
Choose a stock investing account
One of the best ways for beginners to get started investing in the stock market is to put money in an online investment account, which can then be used to buy shares of stock or stock mutual funds.
Profitable investing requires you use a brokerage service that aligns with your investing goals, educational needs and learning style.
With many brokerage accounts, you can start investing for the price of a single share.
Especially for new investors, selecting the best online stockbroker that fits your needs can mean the difference between an exciting new income stream and frustrating disappointment.
Set a budget for your stock market investment
A common myth about investing is that a big fat bank account is required just to get started.
In reality, the process of building a solid portfolio can begin with a few thousand or even a few hundred dollars.
Think about goals you have. Before allocating money to things like entertainment or clothes, put money aside in an investment account.
When you decide to make a budget item for investing, it will change the rest of your budget.
The easiest way to add investing to your budget is to take an honest look at where your money has been going.
When you’re real about how you’ve been using your money, it’s possible to identify items to just cut out.
Read some investing books
When it comes to learning about investing, the Internet is a convenient way to navigate the current information jungle.
Buffett says that, “Knowledge builds up like compound interest.” He actually devotes 80% of his day just to reading.
Now, I know you all have jobs, kids, and a life so you probably can’t devote that much time to reading.
Regardless, I’ve got some great investing book recommendations for you for this year. Start with these.
- The Intelligent Investor by Benjamin Graham
- One up on Wall Street by Peter Lynch
- A Random Walk Down Wall Street (1973) by Burton G. Malkiel
- Common stocks and uncommon profits by Philip Fisher
- The Dhandho Investor by Mohnish Pabrai
- The little book that beats the market by Joel Greenblatt
- How to Make Money in Stocks (Fourth edition, revised 2009) by William J. O’Neil
Beware of Penny Stocks in the stock market
Penny stocks are shares that are available at Rs.10 or less. We are not saying that all penny stocks are bad. However, in most cases, these stocks are priced low because their demand is low and/or the company is on the verge of collapse.
For investors in penny stocks, the low price is a big draw. Instead of buying 10 shares of a blue-chip company like some X, they can buy 10,000 shares with the same money. That’s where they make the cardinal mistake of confusing price with value.
Focus on the long term investing
The main reason to buy and hold stocks over the long-term is that long-term investments almost always outperform the market when investors try and time their investments. Emotional trading tends to hamper investor returns.
The advantage of long-term investing is found in the relationship between volatility and time. Putting your money in long-term rather than short-term investments also provides tax advantages on capital gains.
Control Your Emotions
You are bound to be emotional and overwhelmed when you first start investing in the stock market as earning good returns may make you happy but losing money may hurt.
Emotions are bound to come to the forefront while investing. The chances of making the wrong investment decision increase when you decide emotionally.
Keep your emotions in check while investments. Good returns make people happy, but losses lead to despair and many people stop investing.
It is not advisable to halt investments after losses, which is why it is important to keep emotions aside while investing.
An unemotional decision-maker would assess the decision against facts and data and probably hold on to quality stocks while redeeming the ones that are not fundamentally strong.
Learn to never make your investment based on your emotions.
Manage your stock portfolio
While fretting over daily fluctuations won’t do much for your portfolio’s health or your own there will of course be times when you’ll need to check in on your stocks or other investments.
If you follow the steps above to buy mutual funds and individual stocks over time, you’ll want to revisit your portfolio a few times a year to make sure it’s still in line with your investment goals.
Stock market investing Conclusion
Remember, there is a lot of stock market investment advice on the internet with celebrity investors sharing their portfolios with people.
Novice investors often tend to imitate these portfolios assuming that they will earn similar returns on a lower scale.
This is dangerous since most of these celebrity investors do not share their entry/exit strategies.
Hence, stick to the basics and look for the best ways to start investing with little money. Investment is not gambling.