The investment process in the stock market is a set of guidelines that guides the investors. There is no minimum limit specified by the Securities and Exchange Board of India (SEBI) to start investing in the stock market. Therefore, you can buy stock for even Rs.10. It means you do not need huge funds to start investing in India. However, you require sufficient capital to cover the price of a stock. Stock prices range from Rs.1 to Rs.75,000. You are free to buy any stock in any quantity to achieve your financial goals. Open Demat and trading accounts to start your journey in the stock market.
Investment decisions are influenced by certain factors. Before making any purchase, an investor must do ample research on different financial securities. Following are the factors that should be considered while making an investment decision:
Time horizon
Long-term investors have an opportunity to invest in relatively riskier options like stocks. The volatility of stocks usually wipes out over time. If you start investing at an earlier stage, you will have better chances to utilize the power of compounding in your investment portfolio. However, if you are a short term investor, you can opt for investment with a stable and guaranteed return.
Risk Appetite
Your risk profile i.e. willingness to take risk impacts your investment preferences. Let’s take the example of equity. If you are an investor who is uncomfortable with the volatility of the stock market and who loses his sleep if the investment portfolio goes down even for a day, then equities are not for you. Instead, you should build an aggressive portfolio. Still, if your preference is equity, start with Monthly Income Preferred Securities (MIPS) that are debt oriented mutual funds, balanced funds, or debt funds that invest in a mixture of both debt and equities.
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Investment Goals
If you know the financial goal to be achieved, you can make investment decisions easily. Because you know the amount required to invest and achieve a specific goal and timelines. Do not mix needs with wants. Once the investment need is known, make an investment plan and stick to it as well.
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Investor’s knowledge
The experience of an investor plays an important role in decision making. An experienced investor is able to make faster investment decisions without taking too much time. Move slowly before taking any drastic step. Beginners should take the help of financial advisers to make smart decisions.
Expectations of returns
You need to choose the right investment type to meet your expectations. Higher the expected return, the higher the risk associated with an investment. Depending on your return expectations, the investment amount in the stock market will vary.
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Requirement of Demat Account
As you know, an investor and trader in the stock market need to open brokerage accounts i.e. Demat and trading accounts with a brokerage firm to start investing and trading. Demat account charges vary from broker to broker. Most brokers offer a free Demat account to open online at a very nominal amount of annual maintenance charges.
Benefits of a brokerage account
- 100% digital account opening process.
- Lowest brokerage rates.
- Secured and advance the trading platform.
- Affordable subscription packs.
- Allows you to invest in multiple financial securities.
- You can go for securities lending and earn/borrow money by giving out your securities.
- You can easily buy and sell securities in the international market depending on your affordability of forex conversions.
So, set a firm foundation for your investment. Diversify and allocate assets wisely. Keep your investments on track with active management. There is no minimum amount required for investment but a good investment in companies with good potential is always preferred.
