In this article, I’ll be sharing the top share market tips for beginners on how to ensure that you do not mess up the first time investing in the share market.
Share markets as we know are unpredictable in nature and therefore require the complete and utmost attention of the investor.
There are two phases of a share market that you need to know:
The Bull & The Bear
What is the bull?
An animal, but also the optimistic phase of any share market is known as its bullish phase.
Why bull? A bull attacks with its horns in an upward motion. Similar to what the effect is on the share market in an optimistic phase.
In the optimistic phase of any share market, the top shares that make up the index (For example – Nifty 50), are on the rise.
What is the bear?
Again, an animal; but also, the pessimistic phase of any market is known as its bearish phase.
Why bear, you ask? I’ll let you figure that one on your own.
In the pessimistic phase of any share market, the top shares that make up the index (This time let’s say Sensex), are in the fall.
But that’s enough about animals tied with philosophical attitudes.
Let us focus on making sure that you make the right choices in this game.
What Separates a Newbie Investor from a Pro?
A good call? Luck? Patience? A loyal broker?
The answer is all of them, some more than others in fact, but all of them will play a role in your career of investing.
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10 Best Share Market Tips for Beginners
Let us start by listing the best share market tips that you need to keep in mind.
1. TIME AND PATIENCE!
Investments are bought with money but made with time. You have to be patient or you might become one. This is the first and foremost rule, or rather, a norm that goes.
Ever heard of the phrase, “Time is money”? Yeah, well, start taking it seriously.
It does not matter what amount of capital you put in, whether small or huge (If you are a new investor, then it would be wise to put in a small amount, just saying).
Giving your investment some time doesn’t actually guarantee a 100% chance of success, but it sure prepares you for your future choices in the market.
And on the other hand, a growing economy like ours is suited best for long-term investments. (Real estate is looking pretty hot- let us not get distracted). This one is the best share market tip for beginners in India.
2. START SMALL!
If you are scared that your initial investments may not bear fruits, plant a fewer amount of seeds.
As I said before, newbies should invest a small amount of money.
Generally, new investors put in the money they have saved from the month’s salary, which is totally fine and actually preferable. This is one of the best share market tips for beginners.
3. KNOW WHAT YOU WANT!
Before actually investing, choose the securities that you want to invest in after thorough research and knowledge.
Choose only those shares which meet your financial requirements and on which you have spent a considerate amount of time planning and understanding.
After you decide which shares to invest in, read the next point.
4. DIVERSIFY!
A good method to avert risks is to diversify your portfolio.
There are of course many ways to diversify your portfolio.
So, once you have chosen the shares –
- Find out their correlation with each other. (Correlation plays a vital role in a portfolio)
- Invest in shares from different sectors.
- Foreign investments.
A thoroughly planned out portfolio not only provides you a stable income but also stable growth. (That is unless markets decide to repeat the 2007-08 recession. In which case, all the best)
This does not stop here.
- Diversifying your portfolio one time is not enough.
- You have to keep a regular eye out for all the shares in your portfolio.
- You have to be up-to-date with the news and scenarios and even the rumors.
These methods may require certain advanced calculations, which you can learn by taking some good share market courses.
For a long and stable growth, you will have to keep grinding because there is no one fixed share that will stay in your portfolio forever.
So, in conclusion, keep your awareness on the high so that you can replace an old stinky share with a new fresh one.
5. DO NOT LET YOUR EMOTIONS INTERFERE!
Let me tell you something, a share market is a cruel place, with no place for feelings, or emotions. It does not care for your losses or your profits.
It does what it has to do every weekday and surprisingly enough, takes the weekends off.
Having said this, never let a decision regarding the share market be influenced by any kind of emotion.
This not only goes for the newbies but also for the veterans.
Although there is no logical reasoning as to why we should not let our emotions sway us, there is no logical reasoning as to why they should either.
This point ties directly with patience.
There are two ways to approach any situation:
- Being reactive – “Oh no the share is falling, let us sell it before it drops further!”
Although many argue that this is the best way to react in this situation, please try to understand that it is a share market and will definitely not drop to zero that exact second.
Give it time, if it falls to near your risk tolerance level, then you may sell it. - Then there comes the proactive approach, wherein an investor invests in Reliance or Tata because his/her father used to invest in the same.
There is a 50-50, or knowing the share market, an 80-20 kind of ratio, where 80% of the time, you will end up losing money (Definitely not saying that Reliance or Tata are bad companies, just wanted a prejudice).
If you are lucky enough to make money out of the situation, do not be happy, because there is a pretty good chance of your luck running out in the share market. (As I said, 80-20)
Neither let your emotions influence your decisions nor let anyone else’s emotions sway your hand.
6. KNOW YOUR RISK BEARING CAPACITY!
What I am about to say is pretty obvious and most of you know it, but do evaluate the amount of risk you are willing to bear while investing.
It helps.
This reminds me of the Risk-Return trade-off.
“Higher the risk, higher the return”
But it seems unfinished, doesn’t it?
That is because as I mentioned, nothing can guarantee a return in a share market, so allow me to rephrase it to –
“Higher the risk, higher the expected return”
Well, do not overdo yourself while investing in share markets.
This brings me to my next point.
7. DO NOT TAKE A LOAN FOR YOUR INITIAL INVESTING!
If it is your initial stage of investing, DO NOT borrow money to invest.
Even if you do, make sure to securitize that debt and carefully plan out your investment decisions.
You DO NOT want to get caught up in that web, trust me.
8. DO NOT GO WITH THE FLOW!
This is the most basic instinct of any human being.
“Hey hey, everyone is getting a piece of Share A, I want one too!”
Granted that every share derives its value from demand, but it’s not that simple. One small rumor can turn the tide.
As I said before – Choose only those shares which meet your financial requirements and on which you have spent a considerate amount of time planning and understanding.
Also, the 80-20 part, where 80% of the time, if you have not seen your plan through, you will end up losing money. This is again a very important tip for beginners.
9. KEEP YOUR GOALS REALISTIC! STAY ON EARTH!
DO NOT count your eggs before they hatch!
Share market investments are unpredictable, so unless and until you see results, do not make any plans or decisions for the future.
Another point related to this would be – Not to expect unrealistic or extraordinary profits.
Keep your goals and expected profits more to the realistic side, rather than being too optimistic or pessimistic.
That reminds me, the legend Benjamin Graham, told us in his share-market bible –
The Intelligent Investor, that a smart investor who buys from the pessimistic market and sells in the optimistic market.
So, what do you think, are you ready to be a smart investor?
10. FOCUS ON THE COMPANY’S PERFORMANCE!
The next point requires the basic understanding of the workings of an organization, i.e. the finances and the records and of course the events taking place.
This point is particularly important for new traders.
- Instead of trying to determine the forces of the market, focus on how the company is performing.
- Many of the newbies try to determine the demand for a particular share and so on. Whereas the main factor is the intrinsic performance of the company.
- If the company performs well, the flow of demand will automatically go towards that company. (Not sure when, but will go for sure)
Later in the stage comes the regular monitoring of the shares that you have invested in as I said in the diversification point, but this includes monitoring of the share market too.
“BTW I made this infographic which more or less summarizes my article”.
CONCLUSION
I have said this on countless occasions, share markets are influenced by news and rumors and even Donald Trump’s tweets, on a few occasions.
DO NOT let these little events pass you by.
In conclusion, I would like to summarize the share market tips for beginners by saying –
The greater wealth comes to those with greater knowledge. (And I do not mean knowledge as in education, that is just another trap)
Plan, organize, diversify, monitor, don’t take a loan, but above everything else – know patience.
Best Share Market Tips – FAQs.
1. What are BSE and NSE?
BSE is Bombay Share Exchange
NSE is National Share Exchange
Both of these are the two biggest share markets of India.
2. What is a broker?
A broker is an agent that helps you trade shares, of course in exchange for a commission. Think of a broker as a middleman between shares and you.
3. How to start investing?
Glad that you asked. The first step towards investing is opening a Demat account. Then find a good broker. Then read my article. Easy.
4. What is a Demat account?
Demat, short for dematerialized, is the electronic form of all the securities a person holds. It is like a bank account, just for securities.
5. What is an Index?
Think of the Index as a representative for all the big, major shares in a share market.
If the Index is going up, it means the share market, in general, is doing good.
But if it is going down…… ah well.
BTW I made this infographic which more or less summarizes my article.
The blog was quite informative. Thanks for adding this to our knowledge.
if you want to start trading in the share market then Reddito Capital Investment Advisors Private Limited is a leading financial services provider with a presence in India that provides MCX, Nifty, NSE, Equity and commodity service.