5 share market investment tips for beginners

A new trader or investor must know that no matter how old is one in investing, one can go wrong and can never correctly predict the market behavior always.

share market investment tips for beginners, stock market trading, rules,
The basic fundamental that investors need to follow is to protect your capital.

Thanks to the stellar rise in Nifty 50 and Sensex 30 indices and also in the prices of several stocks, new retail investors are also rushing-in to the stock market bandwagon. From 2.12 crore in March 2020, the number of investor accounts with CDSL has more than doubled to 4.64 crore in September 2021, of which 1.3 crore accounts have come in the last six months between April and September 2021.

Unlike investments in mutual funds, direct investments in stocks come with a higher share of risk and reward. More than holding quality stocks over a longer period, many retail investors are trying their hands also at day trading or short term trading. Investors need to be aware that stock market investments can be rewarding as well as there could be losses that can eat into one’s capital. The movement in stock prices may not always be linear and there could be sustained periods of bear market as well. Stock picking in itself could be based on fundamental and technical reasons and if one is into buying stocks for short to medium term, there has to be a proper approach to it.

In an email interaction with FE Online, Gaurav Udani, founder and CEO of ThincRedBlu Securities shares some tips and rules that may help retail investors especially beginners while buying stocks. Excerpts:

1. Protecting Capital

One must also understand that investment is like the hare – slow and steady wins the race. The basic fundamental that investors need to follow is to protect your capital. One must establish well judged threat management practices. It can be done in the following ways:

(a) Define a loss per trade – One must pre-decide the amount of loss that one can bear per trade. One must exercise that firmness and exit the move.

(b) Part Investments – One must not invest all the capital in any move, no matter how confident one is.

2. Understand Expectancy of A Move

A new trader or investor must know that no matter how old is one in the game, one can go wrong and can never correctly predict the market behavior always. Often, well experienced players have also gone wrong in their trades or bets. Here, it is important to know how much money you can make in your favour instead of how much money you have lost when the trade results in a loss.

3. Get a Reality Check

Wanting to double the capital every year to gain a 10% profit every year is very unrealistic. This is not possible in the long-term. Having set real goals is the first step to be successful here. Having an aim of achieving 20 – 25 % is a safe bet. Also, one must not fall prey and buy into policies that promise more returns.

4. Do Not Invest in Leveraged Instruments

Inexperienced investors must definitely stick to equities in the cash division only and not into futures and options. In investing, leveraging is a double – sided sword. The prospects to make a profit increases but so does the loss.

5. Keep It Simple

There are many young players who go a little over the top while strategizing and purchasing new softwares to gain an edge over the other. One must understand that there is no pot of gold that can be achieved. One must keep it simple to maintain financial stability. Keep your analysis also simple.

The final piece of advice is to invest in stocks of large companies. It is a safe bet for traders to invest in the top 200 companies. This will ensure that you do not indulge in junk stocks and ensures that you invest in the best that will fetch good returns.

Since time immemorial, equities have helped in long term wealth creation for investors. This has immensely helped a lot of people to achieve their financial goals seamlessly. But the secret of creating wealth from the markets lies in the approach. If you keep the above pointers in mind you are definitely going to fare well in the markets and create wealth for your future goals.

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