Are you interested in investing and keen to learn stock market but not sure how it works? Well, you have landed in the right place. It is disappointing when you come across Nifty 50 & Sensex but have no idea what they do and why they exist. Learning the stock market is the most rewarding skill someone can learn. However, once you learn Stock Market, this skill, it helps you to make money and grow rich. In this article I will discuss on How to learn the stock market for Investing.
When I first started investing in the stock market, I was 19 years old in 2014. It has been a few years now so I have some subject to speak on this topic. After all these years I have figured out one thing: that Investors destiny was never decided by the markets; it is only the investors’ intention.
Let me elaborate, there are different types of players in the market such as short term traders, long term investors. Every player has their own perception and based on that perception and intention people learn certain skills which are relevant to achieve their goal. For example a day trader wants to make quick money and leave, in that case his interest would be technical analysis but not value investing.
What is Stock Trading?
Stock trading is buying and selling of stock to make profit which are traded in Stock Exchange like NSE (National Stock Exchange). Every stock has multiple shares. A share is a part ownership in a company. In other words Zomato has been listed in the stock market procuring public funds. Public buys some shares of Zomato to become equity investors of that particular company.
Why is it Important to Learn Stock Market?
Let me ask you a question. How would you feel if there is a machine working for you and you own all the profits it makes? Sounds like a great deal right. Investing is just that machine where you are putting your money to work for you in return you get all the profits.
When you start a business, you work really hard to implement your business plan, in addition you hire skilled people to get the job done in return you make profits. However in investing you invest your money with proper market knowledge and analysis, you can make profit without working for anyone. Essentially investing is a tool to build wealth through capital appreciation.
It is really important to learn about the stock market these days, especially where people are shifting to mutual funds from banks to save money. Financial education has empowered the public to identify the risk of inflation with the bank interest as the bank provides low interest for the deposits. Whereas Gold, Bonds and Stocks give you much higher.
Who Can Learn the Stock Market?
As a matter of fact anyone can learn stock market and investing as it has no age limit. To be honest, learning never ends. After 10 years of investing I still learn every single day something new in the world of investing.
How does it helps in Career and Future?
If you are someone who is curious about financial markets and acquired relevant skills such as attention to detail, keen observation and analytical skills then a finance career can change your life. Financial education is one of the most in demand careers at the moment.
There are a wide range of opportunities in this field such as accounting, financial analyst, Equity research etc. Although every job has different job responsibilities and requires different skills, essentially it is the financial education and right motive will help you reach your goal. Below are a few career paths explained if you choose to study the stock market.
Stock Broker
Stock Broker is someone who works for a brokerage firm such as ICICI securities, Zerodha, IIFL Securities etc. They typically buy and sell securities on behalf of their clients. These brokers provide investment advice to the clients, manage the client’s portfolio and maintain good relationships with clients.
Financial Analyst
A Financial analyst is someone who finds investment opportunities for the client and provides investment advice. On a typical day they analyse financial data and market trends, create dynamic financial models to evaluate investment opportunities.
Equity research analyst
These analysts are experts in analysing equity investments or stocks and recommend them to institutional investors or retail investors. They conduct in-depth research on companies and perform market analysis before recommending an investment. They typically work for Investment banks, Asset management companies.
Investment banker
Investment banking is the most attractive career in finance one could dream of, in addition it is highly rewarding as well. Basically, an investment banker is someone who works for an investment bank which provides a variety of services such as IPO (Initial public offerings), M&A (Merger and Acquisition) etc. An Investment banker creates financial models and prepares valuation of the investments, in addition they deal with merger and acquisitions, Institutional trading and many more activities.
Portfolio Manager
A portfolio manager is someone who manages a huge portfolio of assets in Asset management companies and Hedge funds etc. Most of the mutual funds and debt funds are managed by Portfolio managers. Many famous investors like Warren Buffett and Peter Lynch were portfolio managers most of their career.
8 Ways to Learn Stock Market
Now that you know why this is important to learn and how it can help you, let us dive into how to learn the stock market.
Open a Demat Account or Trading Account
One of the first things that you do when you have decided to learn the stock market is to open a Demat account or trading account. Trading account provides you access to trade in the stock market through a broker. This is how it works: when you place an order to buy some shares of an X company the broker acts on behalf of you and matches with a different seller with the same amount of shares with the stock exchange.
Almost everyone who ever learnt trading and investing across the globe, eventually learns a lot through their own experience. There is a saying, “You don’t know it unless you do it”. Just get started with an account and start investing with small amounts. Initially invest only that amount, which does not affect your daily lifestyle if you lose. Below are the list of brokerages and their charges.
List of Brokerages:
- Upstox
- Sharekhan
- Angel Broking
- TradeStation
- Grow
- 5Paisa
- Indiabulls
- Motilal Oswal
Understand the Fundamentals
To understand the fundamentals one should follow a few steps. People have different opinions on the stock market which was primarily influenced by either their experience or learning. Basically it is all about perception, how you understand the market. If you think it is gambling everything you read or hear about the market seems gambling. In contrast, if you think buying a stock is just like buying gold or land and property, it becomes an asset. When you buy an asset with proper fundamental analysis with an intention to hold on to it for a long term there is no place for gambling.
Leann Basics:
Learning basics is really important to participate in the markets, as an investor should be aware of some basic concepts such as what is a stock, bond, mutual funds, and how capital markets work, what is an IPO etc. There are many books available in the market to learn the basics of the stock market.
Learning basic concepts will help you in understanding market news and gives you confidence to make quick decisions. Dividend yield, stock split are some of the things every investor should be familiar with. In the era of artificial intelligence everything could be searched through AI, so do a little research on these words and try to understand them.
Investing Vs Speculation:
There is a basic difference between Investing and speculation, which is when you buy an asset or a share in the hope of capital appreciation with proper fundamental analysis for long term this is called investing. In contrast speculation is anticipating momentum of a share price without proper research and just by guessing and greed. It is not that traders cannot make money, which is not true, traders do make money but to become a successful trader one needs to be better equipped with robust knowledge on technical analysis and market psychology to survive. However to thrive as a trader knowledge is not enough you need to be disciplined and consistent with your strategy.
How to find good stocks:
To be honest there is no such thing as good stock, there is good price of a stock. Often newcomers in the market try to follow famous personalities and try to copy their portfolio allocation. However, they fail because the person might have bought the stock when it was undervalued, now that you try to buy the same stock at the peak of the mountain, most probably it does not perform as expected. If you are keen to learn how to choose good stocks, please read this article.
Fundamental analysis:
Fundamental analysis is a process to determine the intrinsic value of a stock using the numbers I financial statements and studying macroeconomics of the company. This gives you a broad picture on how strong are the fundamentals of the particular company. This is a traditional practice followed by most analysts in the market. It also considers the performance of the underlying business in the whole sector and future demand for the product. When performing fundamental analysis you study about the company’s history and future prospects, about the industry, detailed analysis of financial statements such as Income statement, balance sheet, cash flow statement etc.
Read about successful Investors
When you read about something you become knowledgeable on that topic, When you read about successful people, you are basically learning about their mistakes. Successful people write books mostly on how they failed in the beginning, which takes half of their life to realise, you can learn this at a very young age. After reading about a few successful people I found a few things in common. Firstly, they read a lot, they always have a plan and are very disciplined and committed to achieve the goal. Here are the few people you should definitely read about, if you are passionate about investing, Warren Buffett, Peter lynch and Rakesh Jhunjhunwala.
Read Books to Learn Stock Market
Reading books is one of the best ways to learn about the stock market and investing techniques. When I started learning “One up on wall Street” by Peter Lynch was the first book that I had read. Which gave me an overview on how stocks work and what it is that an investor should look for. “Intelligent Investor” by Benjamin Graham focuses on investors’ attitudes. Below are a few books that are recommended to read for investing.
Online Courses
A lot of information is available for free on the internet. It is really important to get the information from a trusted source. Be cautious when you search for a paid course, as there are many scammers who try to suck you into their sales funnel, which would cost you in thousands and give you some crap knowledge which is not useful.
A Genuine online course can provide you with a structured curriculum and systematic learning. Experienced instructors will simplify complex concepts and strategies, giving you real time experience.
Below is a list of recommended courses.
Podcast and Blogs
Often people underestimate blogs and podcasts due to lack of understanding of the internet world. There are many bloggers out there who have proper experience and knowledge on certain fields to write robust content. When it comes to podcasts, from the last few years, youtubers are inviting successful people to their channel for an interview on what they did and how they did. As a matter of fact, these are very valuable sources on the internet. Here is the list of a few blogs and podcasts that you can follow.
Start Investing to Learn Stock Market
All of these above resources are useful. However, “Experience is the best teacher”. The greatest advice I got when I was young was “Just start investing and start early”. I followed the first part, but, somehow I ignored the second half of starting early. When you start early the compounded capital gains can make miracles. The best advice that I can give you is just start investing, eventually the market will teach you a lot of things, depending on your enthusiasm.
When I first started my investing journey I was not sure why I wanted to buy Reliance shares, but later on I realised it was a solid company and profitable. I bought reliance for Rs. 800 per share, when I saw this crossing Rs. 3000 then I realised why I should have started early. There are 2 aspects to it, one is you are giving enough time for the investment to become vast by compounding and second is if you start early you can buy things for cheap, I cannot buy reliance shares for Rs. 200 now. Imagine If I had bought those shares for Rs 200.
Safe Investments
When you are young you feel you have all the time in the world to look at stocks one by one and analyse them, but when you get busy with your work in life you realise you have no time to track your investments. This happens with most of the people. Your aim should not be beating the market, instead you should thrive with the market.
If you are looking for safest investments in equity, I would say Mutual funds and ETFs are the safest in terms of equity to a certain extent. Many investors might do better than Indexes but it is really difficult to beat mutual funds and ETFs, as mutual funds are actively managed by a qualified portfolio manager with a team.
Once someone enters the market regardless of age or intention, Traders become investors and investors become traders, they never leave the market once they understand the magic of stock market.
FAQ’s
Q. How to Invest In Stocks as a Teenager?
There is no age limit to open a Demat account. However, for minors the account will be operated by a guardian until the minor turns 18. There are some restrictions in trading activities for minors, once they turn 18 they can start trading and investing.
Q. Can I learn trading myself?
Absolutely, you can learn trading yourself, unless you don’t trust everything that you see on the internet, because there is a lot of information on the internet which could be misleading. Be cautious of the source of information.
Q. Is investing difficult to learn?
Investing is not difficult to learn, but analysing a stock is difficult without proper knowledge. There are various sources available either free or paid through which investing could be learnt. Creating a good portfolio comes with market time and experience. Best thing to do is start as soon as possible. as possible and read a lot.
Q. Can I start trading with less capital?
Yes. You can start trading with less capital but understand the risk in trading before you start with real money. Best thing to do is practise with demo accounts for a while, until you feel confident on your strategy.
Q. Will the stock market make me rich?
Many people got rich through the stock market. The right question you need to ask is will the stock market make me wealthy? To be honest it is not the stock market or supermarket, it is just you that can make you rich. Many people made money but very few know how to keep it. You can become rich by hard work or by luck but you can be wealthy only if you are disciplined and determined.