Finance

BASIC GUIDE ON HOW TO INVEST IN A SHARE MARKET

A share market is a place where you can buy or sell shares, it is as simple as that. A stock market is basically a share market, except you can also trade bonds, and mutual funds in a stock market. If you are new to this, it is quite easy to get lost. So, here is a basic guide on how to invest in a share market.

  1. DEFINE YOUR INVESTMENT GOALS.

It is important that before you begin investing in the stock market, you keep the end goals of your investment in mind. You need to know whether your investment is short term or long term. Do not go in blindly. A clear idea of your end goals helps you decide how much you want and how long you should stay invested. Hence, it is important that you know what you want: if you are buying a house, or if you are planning for your retirement.

  1. SELECT YOUR INVESTING STYLE.

You can opt to choose stocks and shares for yourself. This way you will be more involved in the process and you can monitor your graph more closely. However, if you choose to do this, it is imperative that you learn stock market investments and how they work. You can always choose to let someone else manage your stocks for you. All major brokerage firms can offer you a robo advisor, which is a low-cost investment management plan.

  1. CREATE A BROKERAGE ACOUNT.

It is crucial that you have an online brokerage account if you wish to invest in stocks. There is a wide variety of options to choose from. You can open a 401(k) account, which lets you invest in shares through mutual funds. Online brokerage account offers the quickest and least expensive way to buy stocks. With this, you can also open an Individual Retirement Account (IRA). Robo- advisor accounts don’t require the owner to pick up individual stocks. They ask you about your investment goals during the initial process and build a portfolio to achieve those goals. It is also much less expensive than a human investment manger and lets you get an IRA as well.

  1. PLAN YOUR BUDGET.

The amount of money needed in the investment depends on how expensive the stocks are. You can opt for a plan according to how much money you are willing to invest. If you want to go for a mutual fund, they often have a high minimum balance. You can also opt for Exchange Traded Funds (ETF). These trade like stocks, which means that you can buy one for a very low cost as well. If you plan on long term investment, you can devote a large portion of your portfolio towards stock funds. However, it is always advisable to start small, so that you can first get the hang of it.

  1. HAVE AN EXIT PLAN.

Know that if you are getting favourable returns today, it might turn around tomorrow. So, always keep an exit plan ready. That is also why it is of utmost importance to set a goal. That way, if your goal is met, you can exit by booking profit. However, if you realise that your stocks are going down, you can always exit by booking loss, so as to avoid even further loss.

At the end of the day, it is completely your decision- whether you want to invest in a share market or not. However, if you do, these pointers could provide some help.