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If you are reading this post then you are either a gamer or a financially aware individual. I say this with 90% accuracy because Hive has been successful in marketing itself to these 2 types of audience in abundance.
Stock trading has never been easy but at the same time it has never been as difficult either. Young individuals derive their inferences from what they hear around. I grew around people who had suffered daunting losses trading in stock markets. Thus as a natural outcome I stayed away from stocks for too long. But in the zeal of earning more money I crossed my paths with equity trading and tried my hands on it some 2 years back. Ever since, I have not regretted my decision.
Why stocks ?
Inflation is the one word answer to this.
Inflation rate in India is between 6 to 7 percent. This simply means that your money needs to grow at 7% per annum for you to continue living the same standard of living. One can't keep up with such a high number with the traditional investment options of Fixed deposits in banks, interest on saving accounts etc. Indian Nifty index has given a 12+ % CAGR returns in the last 5 years.
What is the investment period ?
Unlike traditional investment schemes like NPS, PPF, EPF, FD etc. stocks have no locking period. They can be sold as soon as the next day. It is extremely difficult to earn money by selling stocks every day though. Thus out of my personal experience, investment period of average 10 months is good enough to earn 12% returns from stocks.
How to identify good stocks ?
There are numerous websites to study and analyze the stocks listed in the Indian market. It is highly recommended for individuals to study the fundamentals, business and technical chart patterns of companies yourself before investing your hard earned money into a company. Following are 2 basic websites I use to analyze stocks.
https://www.screener.in/
https://in.tradingview.com/
One can tracks following basic parameters to filter good companies.
- Debt on the company
- Earnings per share
- Sales reports or Profit and loss statements
- Promoter, FII and DII holdings
- Dividend yield
- Market capitilization
Above are very basic parameters. However they are good enough to begin. More specifics can be added by letting the stocks ecosystem grow on you.
How much to invest ?
The amount to be invested is completely dependent on the individual's risk and holding appetite. It can be as low as 500 Rs. A beginner with no knowledge in stocks should only invest an amount of money which he will not be needing for the next 2 years. Because holding periods can be high while you are learning the economics of stocks. Eventually your holding periods will come down as you understand intricacies of the matter.
Taxations on stocks
Tax is something which will follow you everywhere. JK. Income tax needs to be paid on stocks when you earn profit from trading stocks or earning dividends. There are 2 types of taxes namely short term capital gain and long term capital gain. Based on the duration of holding one needs to pay STCG or LTCG. If you hold and book profits in a stocks after more than 1 year then you need to pay the long term capital gain tax. All other profits are short term capital gain and taxed slightly higher than LTCG. Annual maintenance fees or brokerage charged by stock exchanges are over and above the income tax.
General advice out of personal experience
- Stock market is a very dry and slow topic. It is not meant for people who want to earn money in short period of time. It is a game of patience. Money often flows from the impatient ones to the patient ones.
- Delivery/CNC/Longterm is the safest mode to start for a beginner. F&O, Intraday etc. are the high risk high returns modes.
- Do not rely on tips, social media analysts, TV anchors etc. Develop a habit of making your own decisions based on your own analysis.
- You can never catch the top or the bottom. Don't stress yourself. It is not worth it
- Don't be greedy. Book profits at regular intervals. Any stock that goes up is bound to come down.
- Invest proportionately. Don't invest more than 5% of your portfolio money in a single company. Some sectors can remain down due to government policies, environmental conditions, geopolitical conditions etc.
Every thought in the above post is from my personal experience. Do not consider this as a financial advice in any way. Do your own analysis because you will be responsible for your own profits and losses.
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Wah!! Bhai
Matlab mein bhi financial aware audience mein aane laga. Ye aachi baatlagi mujhe.
I totally agree with you on how other influence our mindset towards the investment. I too had stepped in late, But I am happy that I can call myself a guy who invest in stocks, Although I am yet to see the ROI here but I have a feeling that it isgoing to ok.
Another thing is the inflation rate of 7%, everyone says that its 7% but I think it is higher than that. I have seen increase in my expense for last six months. Had to adjust my budget accordingly.
❤️☮️
The 7% inflation is probably the average CPI of a certain items only.
The easiest of investments can be into ETF or index funds. The Nifty and other indexes have also shown consistent growth.
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