Understanding the Basics of Investing: How to Invest in Stock Market for Beginners?
Stock market investing can be complicated, but with the right guidance and tools, you can trade confidently. By integrating Demat, trading, and bank accounts, platforms like Angel One make trading easy from anywhere.
Steps to Get Started
Choose the Right Stock Broker
Check the broker’s reputation.
Choose brokers with simple, secure mobile and desktop trading.
Provide easy customer support and detailed portfolio reporting to improve trading insights.
Open Your Account
Visit the Angel One website and select their beginner-friendly Angel Eye platform.
Complete the registration form, after which a sales team member will guide you through the process.
Submit KYC documents (address and identity proof) and sign the member-client agreement outlining the trading terms.
Once verified, you’ll receive a trading kit with login credentials. Change your default password for security.
Learn the Trading Platform
Attend the demo session offered by Angel One to understand the trading tools and process.
Use online resources like FAQs and customer support to enhance your knowledge.
Some brokers also provide short-term training modules to help beginners grasp stock market basics.
Starting Online Trading
Essential Accounts: A Demat and trading account with the same provider simplifies tracking your investments.
Start Small: Invest only surplus money you can afford to lose; avoid borrowing or selling assets to invest.
Avoid Market Timing: Don’t panic-sell when prices decline. Observe trends and avoid reactionary decisions.
Gain Knowledge: Learn technical and fundamental analysis to understand market patterns, oscillators, and trends.
Leverage Insights: Use research reports and analyst recommendations for better decision-making.
Develop Your Strategy
Start with small trades, track market trends, and adjust your strategies as needed. Trading involves losses; confidence and discipline will help you win over time.
Disclaimer: The information provided is for educational purposes only. Please seek expert advice before making investment decisions.
Understanding the Basics of Investing: Saving vs Investing
Saving and investing serve distinct financial purposes and are equally essential for sound financial planning. While saving helps you manage immediate needs and emergencies, investing focuses on long-term goals like wealth creation. Recognising this difference is key to making better financial decisions.
Key Differences
Objective: Savings are short-term and easy to manage, aimed at creating a financial safety net. Instruments like fixed deposits and recurring deposits are common. Investments, on the other hand, focus on long-term goals such as buying a house or funding education. They require more research and market understanding.
Liquidity: Savings offer high liquidity, allowing quick access to funds in emergencies. Investments vary in liquidity; for instance, growth stocks are more accessible than mutual funds or bonds.
Risk and Returns: Savings are low-risk or risk-free, providing predictable returns of around 4–8%, mainly preserving money’s value. Investments carry varying degrees of risk but offer higher potential returns, making them ideal for wealth creation.
Balancing the Two
Savings and investments complement each other. Savings ensure financial security and liquidity, while investments enable you to achieve larger financial goals. For young professionals, investing surplus income after covering expenses and emergency funds is wise. For families, maintaining a robust emergency fund should take priority before investing.
Smart financial planning requires a balance between the two. Treating them as distinct tools ensures your financial stability while enabling long-term growth.
Disclaimer: The information provided is for educational purposes only. Please seek expert advice before making investment decisions.
Understanding the Basics of Investing: effect of inflation on investing
Your investments and purchasing power are affected by inflation. It occurs when too much money chases too few goods, raising prices and devaluing money. This value erosion affects your ability to buy and your savings over time. Without inflation-adjusted investments, your savings may not be enough to cover future price increases, reducing your purchasing power.
How Inflation Affects Investments
Inflation impacts investments in two significant ways:
Savings: Inflation devalues savings over time.
Reduce Real Returns: If inflation exceeds investment returns, real profit decreases or becomes negative.
A 2% investment with 3% inflation yields a -1% return after inflation adjustment. Bonds and fixed deposits are especially vulnerable. These instruments have fixed returns that may not rise with prices. In addition, inflation devalues the invested principal. At 3% inflation, a ₹100 bond over five years loses value, reaching ₹83 by maturity.
Understanding Nominal vs. Real Interest Rates
Nominal Interest Rate: Gross return without inflation. It represents market inflation expectations but not purchasing power.
The real interest rate is the nominal rate minus inflation, which represents your returns’ true purchasing power.
Rising nominal rates indicate rising inflation expectations, while falling rates indicate declining inflation. Real rates show your wealth growth better.
Inflation’s Mixed Impact on Investment Portfolios
Inflation can positively or negatively affect different asset classes:
Stocks: High inflation raises prices, which may boost company earnings. Inflation may temporarily lower stock prices by reducing consumer demand.
Commodities: Commodities rise with inflation, making them a hedge against inflation.
Protecting Your Portfolio from Inflation
To safeguard your investments, consider these options:
These bonds, issued by governments or companies, offer inflation-indexed returns to protect against rising prices.
As interest rates change, floating interest rate products adjust coupon payments to match inflation.
Certain commodities that rise with inflation are good hedges.
Equity Income Funds: Dividend-paying companies can provide inflation-tracked income.
Disclaimer: The information provided is for educational purposes only. Please seek expert advice before making investment decisions.