How to Understand Investing and Stock Market

Want to learn how to invest in stock markets? You may have always wondered about what stocks and share markets really stand for. Every individual has fixed life goals and objectives along with plans to achieve the same. For instance, you may wish to build your own home in the future or buy a car, or even travel/study abroad. You should plan suitably to achieve these future financial and life goals without any hassles.

Share markets and stocks offer high returns if you follow the right strategies and you can consider beginning your investment journey at a comparatively younger age while maintaining the same periodically for a longer duration. You can deploy investments for shorter or longer terms, depending upon your specific requirements. On the basis of overall risk appetite, dependency, and age, you can either be an investor or trader in the share market. 

Since markets are always linked with risks, you will have to tread very carefully. Multiple investment options available today in the share market include mutual funds, equities, IPOs, SIPs, debentures, bonds, commodities, derivatives, and currency. 

How should you invest in share markets? 

• For investing in stocks, you have to open your own Demat and trading account online. You can do this easily with the help of a brokerage or online platform and link the bank account to the same likewise. Opening a Demat account is a really simple and convenient procedure. Once you get the trading and Demat accounts sorted, you can start your investments in the share market in India. 
• It is vital to be familiar with the prevailing stock exchanges and their operations. Stock exchanges are platforms where shares are sold or bought. The exchanges are under the supervision of the Securities and Exchange Board of India (SEBI). The key stock exchanges of the country are the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). 
• You should choose a specific financial asset for investment purposes on the basis of your goals. 
• You can choose debt-based instruments such as bonds for getting income regularly while preserving your capital simultaneously. 
• If you are willing to take on higher risks for the appreciation of capital, equities are recommended investments. 
• Studying a company carefully is recommended before investing; study the performance, future growth potential, financial position, and so on. 

Kinds of Stocks that you can purchase and other vital information 

• Whenever you purchase any share, you can either be a common shareholder or even a preferred shareholders on the ownership basis. 
• As a common shareholder, you will have permission for voting at meetings of shareholders and will have eligibility for getting dividends too. If the company, whose stocks you have bought, hits bankruptcy, then you will get the shares out of proceeds arising from liquidation post payment of all preferred shareholders and creditors alike. 
• You will not have voting rights as a preferred shareholder but you will get the dividends before they pass to common shareholders. 
• You can buy large-cap, small-cap, and mid-cap stocks on the basis of market capitalization. This is equal to the share price multiplied by the number of shares outstanding. Outstanding shares are those that may be purchased and sold across public markets. 
• You can buy large-cap stocks of companies well settled in the market including giants in their respective fields, i.e. Wipro, TCS, and the like. These are relatively safer companies to invest in. 
• You can buy mid-cap stocks of entities with future potential for growth and the investments are comparatively riskier as compared to large-cap companies. 
• Small-cap stocks are those of companies that are startups and new entities and investments are the riskiest. However, people take risks owing to the possibilities of these companies turning into overnight successes. 
• IPO (Initial Public Offer) is where companies raise money from the general public through this exercise. The shares are sold for bringing capital to accelerate future growth. Your yield will remain high by investing in a share owing to the sheer power of compounding. 
• You will have ownership of a company with stocks/shares/equity. You can buy and sell the same via a brokerage. 
• Mutual funds have money pooled from numerous investors before it is invested in several financial instruments. Investors hold specific units and profits are distributed in proportion to the number of units held. 
• Bonds are fixed-income instruments or debt instruments, based on which companies/governments borrow money at agreed rates of interest for a particular duration. These have comparatively lower risk levels. 
• Derivatives are financial contracts with values derived from underlying assets. They include futures, swaps, options, and forward. 

These are some vital aspects that will help you understand the various nuances of investing in the stock market and accumulating wealth for the future.