How Do You Start Trading and Investing? – Building An Ideal Stock Portfolio and Making Money

How Do You Start Trading and Investing? – Building An Ideal Stock Portfolio and Making Money

The stock market holds an attraction for many investors, both budding and seasoned. While for budding investors the stock market can prove to be an avenue for quick returns, for seasoned investors, the stock market is an avenue for wealth creation. In fact, after the pandemic, the popularity of stock trading has intensified further as the numbers indicate.

As per the data furnished by CDSL and NSDL, the two primary depositories in India, active Demat accounts increased by 10.4 million in the year 2020.

Moreover, in the third quarter of 2020, retail ownership of 1500+ companies listed on the NSE jumped by 9%, which was the highest since March 2018. 

While the stock market popularity is increasing, its technical aspects should not be ignored.

The stock market has the potential of delivering attractive returns but only if you invest in it wisely.

The stock market for beginners might look like a challenging platform and so, there is a need to simplify it. 

So, here are some important principles of stock trading for beginners, which should be kept in mind when investing in stocks –

 

1. Principles of stock trading for beginners

  • Invest your surplus funds

While investing is good, you need to pay your bills too.

So, meet all the necessary expenses to arrive at your disposable income, i.e. the income earned minus the expenses. This disposable income is your savings which you can invest in stocks and other avenues to generate returns.

These savings, or surplus, can then be invested in the stock market.

 

  • Do not go all in

When you are starting your journey in the world of stock trading, you need to be very careful.

Start with baby steps so that you do not expose all your savings to the volatility of the equity market.

Moreover, when you start with small steps, you can also learn the ropes without too much to lose.

So, even when you have a considerable disposable income or surplus to invest, don’t go all in. Start with testing the waters of stock trading. Invest in a few stocks at a time.

Do not put all your savings in the stock market. If there is a sudden tumble, you would suffer a considerable loss.

Expose a part of your savings to the stock market. The rest of your savings should be allocated to other investment avenues which would give a diversified portfolio.

This would ensure that even if the stock market is in a downturn, other investment avenues deliver returns on your investments.

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  • Do not borrow to invest

This is the worst mistake that many failed investors have made.

When the stock market is giving good returns, many investors want to maximize the growth potential.

If they have limited savings at their disposal, they resort to debt to invest. Their belief is simple – they can earn good returns on the borrowed money and make an additional gain.

Does this belief work?
It might not, especially if the stock market turns volatile.

The stock market is highly dynamic. While it might be scaling new heights, a small factor can reverse the trend and make it volatile.

Spotting this trend reversal is difficult, and for beginners, it can prove to be impossible.

So, borrowing to make more money is a fatal flaw. Invest only what you can spare from your income. No matter how high the share market is climbing, never get tempted to borrow. You never know when the tables can turn.

Speculate with your money, not with others’ or you might not only suffer a loss but also find yourself in debt when the market tumbles.

 

  • Be careful when picking the right stocks

There are more than a thousand stocks trading on the stock exchange. Can you invest in all?

To earn attractive returns from the stock market, you need to choose the right stocks for your portfolio.

The choice depends on your investment strategy and the profit-generating potential of the stock.

There are three main types of stocks in the share market –

  • Large-cap stocks belong to companies that have a high market capitalization. Such companies are established companies that are financially stable.
  • Mid-cap stocks belong to companies that have a medium market capitalization. Such companies are in their growth stage or in the stage of establishing themselves in the industry.
  • Small-cap stocks belong to small-cap companies, i.e. companies that have just listed on the stock exchange and are on their way to growth.

 

Large-cap stocks have the most stable profile while small and mid-cap stocks are volatile.

As a beginner, you can pick large-cap stocks for lower risks.

Also, when investing in stocks, make a technical and fundamental analysis of the company.

In other words, check the stock’s past trends, its previous highs, and lows, growth, etc.

Moreover, check if the company has strong management, has the potential to grow or not, has financial stability, etc. This assessment would help you know which stocks might generate a profit on your investment.

Just before investing, here are the 9 Different Types of Stocks you Should Know. Read our blog Now!

 

  • Do not follow the herd mentality

What is right for your friend, colleague or neighbor might not be right for you. You need to make investment decisions based on your investment strategy, financial goals, risk profile, etc.

You should not be driven by herd mentality. Even if the herd is following a particular stock, assess the stock first before you invest it. Don’t invest because others have done so.

You need to make sure that the stock that you pick matches your investment needs, not others’.

 

  • Be patient

Stock investing is not a magic wand, spin it and you get rich. It needs patience.

If a stock is doing well, don’t be in a hurry to sell it off and make a profit. It can deliver higher returns if you allow it to grow.

Similarly, if the market suddenly turns volatile, don’t panic.

The stock market experiences cycles of volatility but if you are patient, the market rebounds and recovers. Take the pandemic for instance.

While the market became highly volatile when the pandemic struck, it has doubled up now that the pandemic’s scare is subsiding. 

You need to be patient if you are investing in the stock market because it is a roller coaster ride with many ups and downs. If you can be patient in challenging times, you would come out the other side a winner.

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  • Have a long-term vision

Though the stock market can deliver quick returns, time can multiply the returns further.

Moreover, if the market becomes bearish, you need to give it time to recoup the losses and enter the bullish trend.

Stock market investing is not a short-term game. If you really want to really earn a return from stock investing, give it time and see your portfolio grow exponentially. 

 

  • Diversify 

Diversification is the golden rule of investing. In simple terms, diversification means allocating your investments into different avenues. While portfolio diversification means investing in different types of assets, when it comes to diversification in the stock market, it is all about the types of stocks that you pick.

To diversify in the stock market, invest in large-cap, mid-cap as well as small-cap stocks. Moreover, choose stocks of companies in different industries like IT, metal, pharmaceutical, FMCG, etc. Do not invest in only one company.

When you diversify, the volatility risk of one type of stock is offset by another. Not all stocks might fall. Some might fall while some might rise. The returns earned from rising stocks, thus, balances out the loss suffered from falling ones.

For instance, during the pandemic, stocks across most sectors fell but the pharma and FMCG sector stocks grew due to high demand.

So, when you have a diversified portfolio, you can mitigate the volatility risks of stock investing by investing in different types of stocks.

Here is the A Complete Guide on How to Read Stock Charts – Basics to Advanced. Read this article Now!

 

  • Review your portfolio, regularly 

Lastly, monitor and track your portfolio on a regular basis. This is important for two reasons. One, you can see which stocks are performing well and have the potential to grow so that you can make additional investments in them.

Two, you can keep a tab on non-performing stocks and weed them out of your portfolio so that you don’t incur an opportunity cost by staying invested in them.

So, track your portfolio regularly to watch how your investment is performing. It would also give you an idea of the corpus that has been created so that you can plan your financial goals.

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2. How to start trading in stocks?

 

To start trading in stocks, you need three things –

  1. A Demat account
  2. A trading account
  3. Bank savings account linked to the trading account

 

The Demat and trading accounts are opened with a depository participant authorized by SEBI (Securities and Exchange Board of India). A trading account is linked with your bank savings account.

Any buying or selling in shares is done through the trading account. The Demat account is like a storehouse wherein the shares that you buy are stored in a dematerialized (electronic) format. 

Also, you need a broker through whom you can buy or sell shares. As per SEBI’s rules share trading in India can be done only through brokers. 

When it comes to stockbrokers, there are two main types of brokers that you can choose from –

Read our article on How to invest in stocks in India for trading or long-term investment? – A Complete Guide

 

  • Full-service brokers

Full-service brokers are those who charge a fee for their services. Moreover, they might also charge a brokerage on each trade that you place. For the fee charged, however, full-service brokers provide their expert recommendations on the stocks that you should pick.

They also help you create a diversified portfolio and advise you on stock investing by picking the right stocks on your behalf. For beginners, full-service brokers can prove to be a good choice for expert guidance on stock investing.

 

  • Discount brokers

Discount brokers have become the rage in recent times as they charge minimal or zero brokerage on your trades. They only charge a low fee when you join them and after that, no brokerage is charged on equity trading. However, discount brokers might not give you expert guidance on picking the right stocks and help you with your portfolio. 

 

3 Things To Keep in Mind While Investing in Stock Market

 

 

 

3. Tax implication of stock trading

Before you start stock trading, you need to understand its tax implication as well. 

Stocks are equity instruments and so, they attract equity taxation. If you sell off a share within 12 months of buying it, any returns earned from the transaction would be called a short-term capital gain.

Such a gain would be taxed at 15%. On the other hand, if you sell off a share after 12 months of buying it, the returns earned from the transaction would be called a long-term capital gain.

Such a gain would be tax-free up to Rs.1 lakh. However, if your gain exceeds Rs.1 lakh, the excess would be taxed in your hands at 10%.

For example, say you bought 10,000 shares of ABC Limited on 1st January 2021 at Rs.50/share. In June 2021, you sell off 6000 shares at Rs.70/share. Thereafter, on 2nd February 2022, you sell off the remaining 4000 shares at Rs.80/share. The tax implication of these trades would be as follows –

  1. For June 2021, the period of holding is less than 12 months. The gains earned would be Rs.20/share. Total gains would be Rs.120,000 (6000*20) which would be taxed at 15%. So, on the June 2021 trade, you would have to pay a tax of Rs.18,000.
  2. For February 2021, the holding period is more than 12 months. The gains would, thus, be called long-term capital gains. The gain would be Rs.30/share which would amount to Rs.120,000 (4000*30). Gains up to Rs.1 lakh would be tax-free. The excess gain of Rs.20,000 would be taxed at 10% and the tax liability would come to Rs.2000.

Tip – Long-term stock holding is also beneficial from the tax point of view. It gives you the benefit of long-term capital gains tax wherein gains up to Rs.1 lakh can be claimed as tax-free income. As can be seen in the above example, though the gain is the same in both cases, the tax liability is lower in the case of long-term capital gains compared to the short term.

 

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4. Stock trading for students and housewives

When it comes to stock trading, there is no restriction on who can trade. You just need to be 18 years and above and have a valid Demat account, trading account and bank savings account to start trading in stocks.

If you are a housewife or a student, you might not have a regular source of income. If you have a part-time hustle or if you save regularly, you can start trading in the stock market.

However, be careful when picking stocks. Choose stocks after understanding their profit potential. Also, be disciplined in your investing habits. Do not panic when the stock market suffers volatility.

Be patient and wait for the volatility to pass. If you exercise patience, you can end up multiplying your investments with time.

Also, students and housewives should invest only what they can spare. Do not invest all your savings into stocks. Keep some aside for other avenues too since the stock market is a risky place. If there is a downswing, you might lose your savings and be in the red, a situation that is best avoided.

 

5. Stock trading for working professionals

For working professionals, stock trading can be a good way to accumulate wealth for future financial goals. When you are young and you have a source of income, you can set aside a part of your income for stock trading, every month.

Invest small amounts every month and slowly create a diversified portfolio. Since you are young, you can afford equity exposure and create wealth over a long-term horizon. 

Follow the aforementioned principles of stock trading whether you are a beginner or a seasoned stock investor. Do not speculate too much but invest in other avenues as well to create a diversified portfolio that does not depend only on the stock market for wealth creation. 

 

6. Making money from stock trading

Stock trading is an avenue that is seen by many as a way to make money. Well, given the recent rally in the stock market, both BSE and NSE, the profit potential cannot be ignored. However, you should also remember the risks involved in stock trading. 

When trading in stocks, here are a few tips to make money –

  1. Choose established stocks that can weather out small volatilities
  2. Keep an eye out for the quarterly reports of companies to know which company is earning profits and the future prospects
  3. Keep yourself updated about the latest news and happenings of the stock market. There is something new every day and you need to be updated about the latest developments to ensure that your portfolio remains relevant even in changing markets. Koppr helps you stay abreast of all the latest stock market news. Install the Koppr app on your phone and check the daily happenings.
  4. Learn the technicalities of the stock market to learn how to spot opportunities and make money. Here too, Koppr can prove to be helpful. There are various learning resources on the Koppr app which can help you learn the nitty-gritty of the stock market
  5. Ride out market volatilities and invest with a long-term horizon 

 

The bottom line

Trading on the stock exchange is simple. However, before you start your journey, learn the basic principles of stock trading. Know how the stock market works so that you can use it to your advantage to make money. Learn the tips and tricks of stock trading and become a smart investor.

 

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9 Different Types of Stocks you Should Know

9 Different Types of Stocks you Should Know

The share market has become a popular investment avenue for many due to the attraction of good returns. It is a marketplace where shares are bought and sold. The stock market is a significant factor in the economic development of a country.

It is volatile and reacts to various indicators of economic growth such as inflation, GDP, corporate earnings, and more.

Investors invest in the stocks of a company to benefit from the growth of a company. For their investments, they can earn dividends and capital returns.

But to understand the concept of the stock market, you need to, first, understand the concept of shares.

So, let’s explore –

 

What are Shares?

The capital of a company is divided into equal units of finite numbers of instruments known as a share. Each share represents per-unit ownership of the company. If you invest in a share, you are said to be investing in the company.

For example, say a company issues 1 lakh shares and you invest in 10,000 of them. In such a case, you would be said to own 10% of the company.

For your investment in a company’s shares, you are rewarded. If the company earns a profit, a part of such profit is distributed in the form of dividends to shareholders. Moreover, if the company grows, the value of its shares also grows.

This gives you capital appreciation on the invested amount.

 

Why do companies issue shares? 

Issuance of shares is considered to be one of the easiest, advantageous and successful ways to raise funds for operation and growth. Besides the primary reason for raising funds from the market, there are many other reasons why companies issue shares. Some of the common reasons are as follows:

  • To get funds to purchase assets and equipment
  • To get funds for establishing and developing new projects or products
  • For expansion
  • To increase its inventory
  • To pay off the debts or to redeem its debentures
  • To increase its flexibility and liquidity
  • For the purpose of merger and acquisition
  • To get market visibility

 

Types of Shares

There are different types of stocks that are traded in the Indian stock market. These shares can be classified on the basis of various parameters. The parameters of the classification of the stock and the different types of shares under each classification are discussed below:

 

1. Types of shares on the basis of Stock classes

Stocks classified on the basis of classes are primarily of three kinds. They are as follows:

 

a). Equity shares

Equity shares are ordinary shares of the company which provide voting rights to the shareholders. These shares are also called common stock. Profits are distributed on equity shares in the form of dividends but the dividend is not guaranteed.

It depends on the profit earned by the company in a financial year. Moreover, in the case of liquidation of the company, equity shareholders are paid at the end.

The assets of the company are used to pay off the creditors and liabilities. Thereafter, preference is given to preference shareholders who are paid off for their investments. Once the preference shareholders are paid off, equity shareholders get the residual assets of the company.

Equity shares suffer considerable volatility and price fluctuations but also have the potential of giving attractive returns too.

 

b). Preference shares

Preference shares are the shares for which the shareholders receive preferential treatment.

The dividends are paid on such shares at a guaranteed rate before a dividend is declared on equity shares.

The preference share capital is paid before paying the equity share capital at the time of winding up of the company. Preference shares do not carry any voting rights and they cannot participate in the decision-making matters of the company.

However, if the dividend in respect of a class of preference shares has not been declared or paid by the company for a period of two years or more than two years, then such class of preference shareholders will be entitled to vote on the resolutions and shall have voting rights.

 

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2. Types of shares based on voting rights

Shares might or might not carry voting rights. As such, they can be differentiated on this parameter as well. Here are the types of shares based on voting rights.

 

a) Differential voting rights shares

Differential voting rights equity shares are the common equity shares that do not have voting rights. These shares are traded in the stock exchange like other regular equity shares but at a discounted value and carry higher dividends in comparison to ordinary equity shares. A company planning to offer differential voting rights equity shares is required to fulfill the eligibility criteria before issuing it.

 

b) Shares with voting rights 

These are equity shares that have full voting rights. Shareholders owning these types of shares can vote on the managerial and executive matters of the company. They can vote at the company’s meetings and play a part in the management of the company.

 

Check out our blog on How to Value a Stock? – The Definitive Guide.

 

3. Types of shares on the basis of tradability

Stocks of companies might have different trading features. This, further, differentiates shares. Have a look –

 

a) Derivative stocks

Derivative stocks are stocks that are offered with an inbuilt derivative option.

These stocks are contracts that derive their value from underlying assets. Derivative stock comes with a ‘call’ or a ‘put’ option.

A call option offers the option of buying back the stock by the company at a certain price on a certain point in time whereas a put option provides the holder to sell the stock to the company at a certain time and a certain price.

 

b) Hybrid stocks

Hybrid stocks are nothing but preference shares that give you the option to convert them into equity shares after a specified time and if specific conditions are met.

So, when the shares are preference shares, you cannot trade them on the stock exchange.

But, if you opt for conversion and the shares are converted to equity shares, you get the option of trading them on the exchange for a profit.

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4. Types of shares on the basis of market capitalization

Market capitalization refers to companies’ total shareholding. The market capitalization of a company is calculated by multiplying the total number of shares outstanding in the market with the current market price of the stock of the company.

The market capitalization of the company is one of the significant factors to know the financial position of the company.

The Association of Mutual Funds in India prepares a list of companies based on their market capitalization. This list determines which companies are large-cap, which are mid-cap, and which are small-cap.

Then, depending on its classification, the company’s stocks are also classified in the same category. Have a look –

 

a) Small-cap stock

Small-cap companies are those that rank 251 and above in the market capitalization list issued by AMFI.

These stocks have the potential for good growth in the future and are a good choice for investors who are looking forward to investing their funds for the long term.

Investors who are willing to withstand price volatility and are not particular about current dividends can invest in small-cap stocks and make significant gains.

 

b) Mid Cap stocks

Midcap stocks are the stocks offered by companies listed between 101 and 250 on AMFI’s list. Such companies are those that are in their growth stages and have the potential to grow in the future.

Mid-cap stocks, thus, provide the benefit of attractive growth potential.

These companies have a good track record of consistent growth. When it comes to volatility, mid-cap stocks are less volatile than small-cap stocks.

 

c) Large-cap stocks

Large-cap stocks are the stocks of established enterprises which are also known as blue-chip companies with large capital reserves at their disposal. These companies are ranked from 1 to 100 on AMFI’s list.

Large-cap companies have already made a name for themselves in the stock market and they are market leaders.

As such, these companies have the capacity to withstand extreme market conditions without going bankrupt. Large-cap stocks, thus, are stable compared to mid-cap and small-cap stocks.

They offer high dividend income and give moderate returns on your investments.

 

Want to get good returns when you invest in Stock Market. Read our complete blog on How to Analyze Stocks to Get Good Returns

 

5. Types of socks on the basis of risk

Fluctuation in the share price is a determining factor of risk associated with stocks.

The higher the risk, the higher will be return and vice versa.

There are two types of stocks based on risk factors which are discussed as follows:

 

a) Blue-chip stocks

Companies with stable earnings and fewer liabilities issue blue-chip stocks to their investors. These companies are none other than large-cap companies which are also called blue-chip companies.

Blue-chip stocks offer regular dividend payments to investors and are issued by well-recognized companies having a history of stable financial performance.

These stocks are, thus, comparatively safer investment avenues for the investors who are looking for low risk and good returns.

 

b) High Beta stocks

High Beta stocks are the stocks that carry higher risk in comparison to blue-chip stocks. The risk is measured through the volatility of the stock price. It is also called beta.

The beta or the risk factor in the stocks can be positive or negative denoting its movement in sync with the volatility of the market or against it.

Higher the beta, the higher will be the risk of the stock, and the higher the returns.

Beta stocks with a beta value of more than one mean that the stock volatility is more than market volatility.

So, if the market delivers a return of 10%, stocks with a beta of more than 1 would deliver a return of more than 10%.

On the other hand, if the market falls by 10%, such stocks would fall by more than 10%.

 

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6. Types of shares on the basis of price trends

Stocks can also be classified on the basis of the movement of their prices in the market against the earnings of the company.

These stocks are influenced by the earnings of the company. There are two types of stocks based on price trends:

 

a) Cyclical stocks

Cyclical stocks are the stocks that encounter high fluctuations in their prices with changes in the market and are generally affected, to a great extent, by the economic conditions in the market.

These stocks grow very fast during the boom cycle. These stocks may slow down in changing economy. Stocks offered by automobile companies and airline industries fall under this category.

 

b) Defensive stocks

Defensive stocks are the stocks which not affected by the economic conditions and as the name suggests, it is used as a defense particularly when the market conditions are slow and poor.

Common examples of defensive stocks are stocks of food and beverages companies.

Know these Top 5 Things to Know About Stock Market Trading. Read this article Now!

 

7. Types of stocks on the basis of fundamentals

Some investors compare the prices of the shares with various factors such as profit earnings per share to find the intrinsic value of the shares.

These investors believe that the price of the share should be equal to the intrinsic value of the share of the company and based on this intrinsic value share the investors make investment decisions.

Types of shares on the basis of fundamentals are discussed as follows:

 

a) Undervalued shares

Shares whose price is less than their intrinsic value are referred to as undervalued shares. These shares are quite popular amongst value investors.

It is believed that the prices of the share will increase in the future and the investors may gain when the share price equals or increases its intrinsic value.

 

b) Overvalued shares

Shares with prices exceeding the intrinsic value are considered overvalued.

These shares are those which are considered valuable among investors. As such, the trading volume is high for such shares.

 

Here is the comprehensive Stock Market Investment Guide includes detailed information all you need before investing in stock markets.

 

8. Types of share on the basis of payment of dividend

The dividend is one of the most significant factors in the share market. They are mainly two types of shares on the basis of payment of dividends. They are as follows:

 

a) Income stocks

Income stocks pay a higher dividend in comparison to growth stocks. Income stocks show that the company is making a good profit and is stable enough to afford the payment of consistent dividends.

These stocks are named income stocks as the stock pays higher dividends to investors translating it to higher income. These stocks include preferred stocks.

To find the stocks offering higher dividends, investors can use the share dividend yield measure to calculate earnings per share from the investment.

 

b) Growth stocks

Growth stocks, as the name suggests, are the stocks issued by the companies which re-invest the earnings of the investors enabling the funds to grow faster.

These stocks do not yield higher dividends but offer long-term capital appreciation. The share value increases with the growth rate providing higher returns to the investors.

Growth stocks are a good choice for investors who are looking to invest their funds for the long term and not as a source of income. Risks involved in growth stocks are generally higher.

So, when investing in stocks, assess the type of stock that you are picking. Moreover, here are some stock investing facts that you should know about.

 

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Facts to know about shares and the share market

 

  1. Shares are risky investment avenues that, though have high profit potential, can cause considerable losses too. So, you should have a healthy risk appetite to absorb possible losses. Try and invest with a long-term horizon so that you can reduce the risks of stock trading.
  2. Have a diversified portfolio of stocks so that you can spread the volatility risks across different sectors of the economy.
  3. Shares are traded on different types of stock exchanges. The National Stock Exchange and the Bombay Stock Exchange are the two major stock exchanges in India.
  4. Stocks can be brought through a depository participant by opening a Demat account. Depository participants are intermediaries between an investor and the depository authority.
  5. There are two types of dividend, interim and final dividend depending on the classification of stocks.
  6. Shares are freely transferable by the shareholders and can be sold to another party.
  7. There are two types of shareholders i.e primary shareholders who purchase the stock when the company issues it and secondary shareholders who purchase the stock from the stock exchange in the secondary market.
  8. Shares are held in electronic mode in a dematerialized form through a depository and a depository participant.
  9. Companies can issues shares at their face value or at an amount higher than their face value. The difference between the amount of share price and its face value is called share premium.

 

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Tax treatment of stock trading

Buying and selling of shares, whichever type that you choose to trade in, attracts tax if you make a profit.

Here’s how the tax treatment works –

  • If you sell the stock within 12 months of buying it, the profit earned would be called a short-term capital gain. Such a gain would be taxed at 15%.
  • If you sell the stock after 12 months of buying it, the profit earned would be called a long-term capital gain. Such a gain would be tax-free up to Rs.1 lakh. However, if the gain exceeds Rs.1 lakh, the excess gain would be taxed at 10%.
  • Dividends earned from stocks are taxed at your income tax slab rates.

 

The bottom line

The stock market is a technical platform where thousands of shares are bought and sold every day. Understand how the market works before you start your stock trading journey.

Also, when picking stocks for your portfolio, do a detailed analysis of the stock to ensure that it is profitable and would give a good bang for your buck.

Also, understand the different types of stocks available in the market and choose those which align with your investment needs and preferences.

Want to stay updated with the latest Stock Market news, information, videos, tips, and podcasts? Download our Koppr App and don’t miss any updates. Download Now!

 

6 Best Stock Market Apps for Investment

6 Best Stock Market Apps for Investment

There are many investment avenues that you can use to create wealth for your financial goals. Among the different avenues, stock trading is quite popular among investors. Stock trading, in the simplest form, means buying and selling stocks from the stock market. It is a popular mode of investment because –

  • It has a high return potential
  • It can create wealth over long-term horizons
  • It is a highly liquid avenue

Moreover, the stock trading activity is done online through an online Demat account. You can place buy and sell orders through a licensed broker to trade in stocks.

Thanks to the development of technology, the advent of the internet, and the increased use of Smartphones, your trusted brokers are now available right at your fingertips.

Yes, you heard it right! Stockbrokers have developed their own apps that allow stock trading through your Smartphones. This is not only convenient but quite simple too.

There are dozens of stock trading apps on the market. But which is the best stock market app?

Wondering? Don’t!

Best stock market apps for investment:

 

Here are 6 of the best app for the stock market which you can consider for your stock trading journey. You can easily compare and choose the best stock market apps for beginners among them.

 

1) Zerodha:

Claiming to be the number one broker in India, Zerodha started its operations on the 15th of August 2010. Popular among traders, 6+ million clients place millions of orders through the application’s powerful ecosystem.

Zerodha contributes over 15 percent of all Indian retail trading volumes. According to Ashley Coutinho’s article written on 5th September 2021, Zerodha has 45,43,870 active clients which capture 19.09% of the market share.

Unique features of Zerodha

Here are some aspects which set Zerodha apart from the other stock market apps for beginners –

  • Besides stocks, you can trade in futures and options, commodity derivatives, IPOs, bonds and Government securities, currency derivatives, etc.
  • Zerodha was awarded Economic Times Start-up of the Year 2020
  • You can learn the technicalities of stock trading with Zerodha’s Varsity, an educational platform for investors and beginners

Pricing

  • All investments that are delivery-based trading are completely free of cost.
  • Flat INR 20 or 0.03 percent, whichever is lower will be executed per order for every intraday trades that are done across asset classes such as equity, commodity, or currency trades.
  • All direct mutual fund investments are absolutely free.

Pros:

  • Offers you a brokerage calculator that helps you evaluate the fees and other taxes imposed on trading.
  • Provides you with trading tools such as Kite, Console, Coin, Varsity mobile, and Sentinel for facilitating your trading.
  • Zerodha’s interactive portal ‘Z-Connect’ covers almost every query of the client in form of blogs, illustrations, and interactive articles. Apart from that users can always reach out to Zerodha via email and phone.
  • Trading in stocks is affordable if you follow the buy-and-hold approach. You don’t pay any brokerage on delivery trading.

Cons:

  • The account opening process consumes a lot of time.
  • Covers only the Indian stock market.
  • Credit / Debit cards cannot be used for deposits and withdrawals.

 

2) Groww:

Groww intends to make investments in India, easy, fast, and transparent. It has 10 million-plus customers handled with 100+ team members. Backed by Ribbit Capital, Sequoia, Y Combinator, Kauffman Fellows, Propel Venture Partners, and Kairos, Groww is operated from Bengaluru.

Unique features of Groww

Here are some salient facts to know about Groww as a trading app –

  • Besides stocks, Groww also allows you to invest in gold, mutual funds, US stocks, futures and options, and fixed deposits
  •  You can download  the app on your Android phone, iPhone as well as on your computer and sync your account across platforms
  • For any help, query, or feedback, you can connect with Groww’s efficient customer service department online.

Pricing:

  • Account opening and maintenance are absolutely free with Groww.
  • For equity brokerage, Groww charges INR 20 or 0.05 percent whichever is lower.
  • For Futures and Options brokerage, Groww charges INR 20 per executed order.

Pros:

  • It has a simple pricing model.
  • The application offers professional management of shares, real estate, gold, bonds, etc.
  • Investing via UPI is possible.
  • You can have portfolio insights by using Groww via the website.
  • The service allows you to compare three mutual funds at the same time.
  • Users can view their SIP history on the application.

Cons:

  • Groww’s investment products offer no option to trade in the commodity, and currency segments.
  • It offers no call and trade services.
  • Groww does not provide any stock tips, research reports, or recommendations.
  • There is no margin trading facility or margin against shares.

 

Do you want to start your Stock Market journey? Enroll in our Free Stock Market Course and learn all about investing in stocks. Join Now

 

3) Upstox:

Started as an idea to make trading easier and cheaper, Upstox currently has 50,00,000+ investors. This platform is backed by Mr. Ratan Tata and Tiger Global management. Upstox Pro platform was launched with a big focus on mobile and powerful trading platforms in 2016. Since then, Upstox has committedly worked for making investments easy as well as accessible to everyone, not only via the web but also via mobile.

Unique features of Upstox

Backed by reputed names in the industry, Upstox also has the following salient aspects that investors should know about –

  • With a single platform, Upstox allows you to trade in stocks, futures and options, NFOs, commodities, IPOs, and mutual funds
  • Started in 2016, Upstox has delivered relevant solutions to lakhs of its customers
  • You can open a Upstox account online with minimal hassles
  • There are hundreds of charts and technical analysis tools that help you pick the right stocks to create a quality portfolio

Pricing:

  • Upstox does not charge a single penny when trading mutual funds and IPOs.
  • The platform charges INR 20 or 0.05 percent, whichever is lower on Equity Intraday, Futures, and Options, Currency, Commodity, as well as Equity Delivery.

You can check out the detailed brokerage rates on Equity, Currency as well as Commodities on Upstox’s website.

Pros:

  • Complete KYC procedure and IPV is available over the web. So, the work that usually takes one to two days or at times even weeks, gets done within minutes.
  • Upstox provides you with all the tools you need while trading such as brokerage calculator, Span calculator, options builder tool, etc. All of these make trading with Upstox extremely easy.
  • The platform answers all the queries of customers within a very short span of time. Users can also reach out to Upstox using its online ticketing system.

Cons:

  • Call and trade with Upstox are chargeable at INR 20 per trade.
  • A particular order called Good Till Cancelled (GTC) is not supported in the Delivery segment.

 

Read our blog on Stock Market investing | The 7 Golden Rules of Stock Market Investments

 

4) Sharekhan:

With 750+ service managers, 3000+ Sharekhan centers in 600+ cities, Sharekhan’s human as well as an online network helps you trade effortlessly. The platform is backed by BNP Paribas – a French international banking group, the largest bank in Europe, and seventh-largest in the world when calculated based on total assets.

Sharekhan is the 3rd largest stockbroker in India. Its services are not only limited to retail customers but also expanded to institutions. The platform has designed attractive prepaid trading plans for high volume customer that reduces brokerage fee notably.

Unique features of Sharekhan

Here are some of the notable features of Sharekhan –

  • Sharekhan is a full-service broker in India. This means that it charges brokerage on every trade in stocks that you place through it. However, for the brokerage charges, the app offers professional advice and guidance in picking the right stocks.
  • You can open an online Demat account within 15 minutes with its hassle-free application process
  • You can consult with experts and professionals to learn the skills of stock trading and to build your wealth
  • Sharekhan uses fundamental and technical research philosophies to help you invest right

Pricing:

  • Sharekhan charges INR 400 for Demat accounts after the first year of free service.
  • It offers trading as well as Demat account opening entirely free.
  • Other charges depend on the type of account that you open and the security that you trade-in.

Pros:

  • Calling as well as trading is completely free.
  • You need to pay absolutely no charges for fund transfers made from banks to trading accounts or the other way round.
  • Using Sharekhan users can have online classroom sessions for beginners as well as advance traders without paying a single penny.
  • Being a part of Sharekhan is being a part of a huge chain across India.
  • Its trading platform, Trade Tiger is available for free.
  • You can invest in different types of securities and assets with a single account

Cons:

  • The platform doesn’t offer a typical three-in-one Demat account.
  • You cannot place an order after trading time.
  • Brokerage charges are much higher compared to other stock market app for beginners.

 

Do you have any questions related to Stock Market? Confused about how to start investing in Stock Market? Get instant answers from experts. Join Koppr Tribe Now! Download Koppr App

 

5) Motilal Oswal:

Available in Hindi, Gujarati as well as Tamil, Motilal Oswal has 22,00,000+ happy customers. The company was awarded as the best local brokerage firm in India at the Asia Money Brokers Poll 2020. Founded by Ramdeo Agarwal in 1987. Motilal Oswal currently has more than 30+ years of being in the Indian stock market. Since its inception, to date, they have burgeoned as a firm that currently serves:

  • Retail customers
  • High net worth investors
  • Institutional investors
  • Corporate clients

The firm has its presence in 2200+ locations and invests a significant amount of its profit in research and analysis.

Unique features of Motilal Oswal

Motilal Oswal also boasts of some unique features that list it among the best trading apps in India. Here’s a look at these features of Motilal Oswal –

  • It offers you good trading platforms that are useful for all kinds of traders.
  • The company has a decent amount of franchise network.
  • It has a fund transfer facility with more than 60 banks.
  • Motilal Oswal is a very established name in the Indian stock market.
  • Its research reports are considered to be the best in class.

Pricing

  • The delivery brokerage of Motilal Oswal is 0.5 percent.
  • Its Intraday and Futures charges are 0.05 percent.
  • Options will cost you INR 100 per lot.
  • Commodities will cost 0.5 percent and INR 20 per lot.
  • The firm doesn’t charge a single penny for opening a trading/Demat account as well as maintaining it annually. However, its Demat account’s annual maintenance charges are INR 441.

Pros:

  • You can freely open an account and also not get charged with maintenance for the first year.
  • You get a free personal trading advisor for choosing the right stocks to buy
  • Expert stock recommendations can be availed free of cost
  • You can invest in IPOs, NFOs, ETFs, commodities, gold, mutual funds, and futures and options besides stocks
  • You get free research reports on leading stocks. These reports help you to make the right trading decisions to maximize your wealth.

Cons:

  • Does not offer a three-in-one Demat account.
  • Its brokerage is a little bit on the higher end than other broker firms.

 

Each one of the above-mentioned applications has its own specialty. So, ask yourself a very important question before deciding the best stock market app for yourself i.e., what are some of the most vital features a trading app should contain? Then choose an app based on its benefits, pricing, and the securities that it offers to trade-in. With these 5 apps, however, you cannot go wrong.

 

Have you selected your stock market investing app? Then learn How to Pick the Best Stocks for the first investment. Enroll in the Course Now!

 

How to start investing with these apps

After you select from the best stock market apps in India, the next step is to start investing in stocks. To do so, here are the steps that you should follow –

  • First, select the app with which you want to start your trading journey
  • Download the app from the Google Play Store or Apple Store
  • Open your account by entering your details. These details include your name, age, address, mobile number, email ID, PAN Card number, Aadhaar card number, etc.
  • You also need to mention your bank account name, branch name, IFSC code, and bank account number to link your bank account with your online trading and Demat account
  • You would have to verify your details using OTP sent to the mobile number and/or the email ID that you registered when filling in the online account opening form
  • If any account opening fee is to be paid, the same should be paid through your net banking account or UPI ID
  • The last step is to submit your documents and a digital signature. Most apps allow you to upload your documents online. Your signature can also be uploaded online on the app’s platform
  • Once the account opening form is filled and the documents are uploaded, the stock trading app would verify your details and open a Demat and trading account in your name
  • Some apps might open the accounts within minutes while some might take 1 or 2 trading days for the same.

 

Watch Our Video on Stock Market Investing

 

 

When you start your stock investment journey with any of these apps, here are few things that you should keep in mind –

  • If you are a beginner, check the historic price trends of the stocks before you pick them. Research the stocks thoroughly so that you don’t go wrong in your choice. Many apps offer research reports and recommendations which you can peruse when picking stocks.
  • Be patient with stock investments. The equity market is volatile. The stocks that you pick might become bearish. Try and hold onto them. They might recover with time and give good returns.
  • Opt for diversification so that you can invest in stocks across market sectors for maximum profitability
  • Keep abreast of the latest news and stories of the stock market. This would give you an insight into the right time to buy and sell stocks.

In fact, the last point is quite important. The stock market is an ever-changing universe. You need to know what is happening in the market daily so that you can change your position in stocks. Moreover, you should get your trading queries resolved with the help of experts. One app that lets you do this is the Koppr app.

 

Read Our Complete Guide on How to invest in stocks in India for trading or long-term investment?

 

6) The Koppr app – making a difference in stock trading:

With the Koppr app, you can plan your finances and get complete guidance on stock trading. The app also features the latest news that you can use to stay informed. Get access to –

  • Blogs
  • Videos
  • Articles
  • Trending topics
  • Latest news
  • Podcasts
  • Videos
  • Channels, etc.

Also, for any queries and help, you can connect with Koppr Tribes, a platform that brings you together with other stock investors and experts –

Lastly, you can take financial courses, test your knowledge by participating in quizzes, attend live financial workshops and do more with your investment journey. Have a look –

So, besides the apps for stock trading, Koppr can be the best complemental app to enhance your knowledge about the avenue. Download the Koppr app and stay updated with the latest happenings in the market which not only affects stock investments but also other avenues like mutual funds, bonds, gold, etc.

With a diversified portfolio, you need to be an all-rounder investor with knowledge of different avenues and how they are affected by market movements.

Koppr lets you do just that. So download the Koppr app and start stock trading with complete knowledge of the stock market. After all, knowledge is a powerful thing, a factor that can make or break your portfolio.

A Complete Guide on How to Read Stock Charts – Basics to Advanced

A Complete Guide on How to Read Stock Charts – Basics to Advanced

Stock charts or technical charts are one of the two most important components of technical analysis. If you are a daily trader or want to become one, these charts will be your best friend.

Whether you are new to trading or a professional trader, you have to use charts to analyze price trends, movement, reversal, and everything you need to know for trading any asset.

This article will read about different types of charts, different information that you can find from a chart, trends and their analysis, how to read stock charts, and other crucial details.
 

A Complete Guide on How to Read Stock Charts – Basics to Advanced:

 

1) What is a stock chart?

 

Stock charts or stock market charts are real-time or historic price charts for different stocks, bonds, or any asset for that matter. These are a graphical representation of prices over a period of time for different stocks and other assets.

These stock charts portray the price movement in the form of lines, candlesticks, bars, and others. You can understand the price trends and any reversal in the trend following these charts.

These charts are also integrated with technical indicators to provide the buy and sell signals. You can find the highest or the lowest price within a given span, for instance, 1 year or 5 years, and similar metrics on the charts.

Learn How to Pick Stocks and improve your stock market investments. Take our comprehensive course Now!

 

2) Types of stock charts

 

Before you learn how to read stock charts, you need to know how many types of charts are there as you first need to identify the type of chart you are going to read. There are mainly 5 types of charts that are used in the technical analysis. They are –

 

1. Daily Bar Chart:

It is one of the most popular charts which provide multiple information like opening price, closing price, and highest and lowest price of the day.

 

Daily Bar Chart

 

There are verticals bars that represent the range of price of the asset. The horizontal line which is going towards the left is for the opening price and the horizontal line going towards the right is for the closing price.

 

2. Head and shoulder charts:

This chart is for understanding whether the price trend is going to reverse or not. It is a reversal chart pattern. There is a “Top” which is formed at the highest point of an upward movement and when the upward trend is about to end. There is a “Bottom” which suggests the downward trend is about to end and that is depicted by the lowest point on the downward trend.

The higher peak in between smaller peaks are known as the “head” while the other peaks are known as “shoulder”

 

Head and shoulder charts

 

Thus, this chart is known as a reversal chart as it is unlikely that it would follow the previous trend as the Top and the Bottom marks the end of that particular “trend”.

 

3. Line charts:

These charts are the most commonly used and easy-to-understand charts in technical analysis. The ‘X’ axis of the graph represents the time and the ‘y’ axis represents the price.

These charts are mainly used to depict the closing price of each day of the asset. The closing prices are plotted and a line is formed.

 

Line charts

 

As you can see in the line chart above for ABC Company (hypothetical), the closing price for 5 days has been depicted in the chart. The closing price on day 1 was Rs. 100 while the same on the 5th day was Rs. 117. To check the exact value on the chart, you need to move the cursor on the exact date.

 

4. Candlestick charts:

The candlestick charts are advanced technical analysis tools. These are a bit complex but once you understand they can help you a lot in analyzing the price trend and other factors affecting the price of the stocks/ assets.

These charts use green and red/pink boxes to indicate the market trend. The green boxed form when the closing price is higher than the opening price (bullish) and red or pink boxes form when the opening price is higher than the closing price.

 

Candlestick charts

 

The thin line below and above the boxes shows the highest and lowest price of the day.

 

5. Point and figure chart:

In these charts, you will find ‘X’ and ‘O’. The price in these charts is plotted against the change in direction. When the price rises, ‘X’ is formed and ‘O’ in case of a fall in the price of the asset.

 

Point and figure chart

 

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3) 5 Things to look for in a chart

There are certain things you need to first identify and understand for reading charts –

1. You need to first identify which type of chart it is. Whether it is a bar chart, line chart, candlestick, or any other as mentioned in the above section.

2. Check the ticker above the above where the company’s information is mentioned and all other necessary details.

3. The next thing you need to do is to choose the time frame for which you want to check the chart. There are daily charts, weekly charts, monthly charts, and charts for the last five days, 6 months, 1 year, 5 years, and 10 years, and maximum time frame. You can select the 1-year time frame and the price movement that had happened in the past year will be visible on the chart in front of you.

4. By moving the cursor on a specific day or bar, candle, you can find out all the information related to that particular day or time.

5. You must check the volume of trade besides checking the price movement. This will help you understand the momentum of the price movement.

 

4) Volume Analysis

As mentioned above, volume is a key factor in analyzing charts and predicting tend in the market. In every chart, you will find the volume more or less. This is because of the reason that volume is a key technical indicator.

The volume patterns you need to know for reading charts are as follows –

 

1. Market up with High Trade Voume= Bullish Trend:

On days when the market is going up and the trading volume is high indicates a bullish trend. It usually means that the price of the stock will continue to increase.

 

2. Market down with Low Trade Voume= Bullish Trend

On the other hand, if the volume of trading is low on a day when the market is going down, also indicates a bullish market. This is because of the fact that not many investors/ traders are participating in the market when it is down and thus it is a temporary slowdown and correction which is not going to last for long.

 

3. Market down with High Trade Voume= Bearish Trend

Now if the volume of trading is high on the days when the market is going down (stock price decreasing) then it indicates a bearish trend or a market when the whole market is selling.

 

4. Market up with Low Trade Voume= Bearish Trend

Finally, if the volume is low on days when the price is going up also suggest a bearish market to persist and the increase in the price is just a short-term counter-trend retracement.

So, volume is crucial because just by looking at the price no one can anticipate whether the trend is going to persist or reverse but when you monitor price movement along with the volume of trading, it can give you a clear picture of the market.

 

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5) Trend Analysis

So, charts are basically for analyzing and anticipating market trends but to understand the trend and analyze the same? Here are the details of analyzing the trend in few simple steps:

 

1. Persistency of the trend:

The first thing you need to see is for how long the trend is persisting. No trend will be forever, it will change over time. If any trend is continuing for a long time and there hadn’t been any retracement as well (not significant corrections) then it is a sign of being alert for a trend reversal soon.

 

2. Volatility of the stocks:

Some stocks are stable while others are volatile. If you are trading a volatile stock, then even within a long-term trend, the graph will be going up and down regularly. You need to focus on the long-term for all these volatile stocks and need not consider the changes in the short term.

 

3. Signs for trend reversal/ momentum indicators:

Some certain signals/ indications suggest a potential reversal in trend. You need closely observe and analyze those indications. Especially momentum indicators help you recognize if the trend is going to reverse or not based on the volume of trading.

If you can analyze and anticipate the trend in the market, you can easily trade any asset smoothly. However, anticipating it requires precision and fine observation skills.

Read our complete guide on How to Analyze Stocks to Get Good Returns.

 

6) Technical Indicators

Stock market charts without any technical indicators are just like graphs to look at. Yes, you can check them and analyze certain things but if you want to make them helpful in your daily trading, then you need to integrate the technical indicators in your charts. Here is a list of two basic and most important technical indicators to use with stock market charts.

 

1. Moving averages:

The first one is the moving average. It is a key tool in technical analysis. The average stock prices over some time are plotted on the chart for analysis.

There are different types of moving average as well mainly depending upon the time frame. There are 50-day moving average, 200-day moving average, and others. The 200-day moving average is one of the crucial ones in chart analysis.

If the trader is bullish about any asset/stock then he or she needs to check whether the stock price was above the 200-day moving average of the stock price or not. On a chart, the 200-day moving average has to be plotted, and then the daily price movement has to be monitored.

On the other hand, if the trader is bearish, then he or she would want to price to remain below the 200-day moving average.

If the price crosses the 200-day moving average from below then there is going to be a bullish market reversal. While if the price line cuts the 200-day Moving Average from above, then a bearish trend is going to start.

 

2. Support and resistance:

Another important technical indicator to know about when reading charts is support and resistance levels. These two levels also help in identifying any upcoming trend reversal.

The support level is the level when the demand for the stock is too high to let the price of the stock fall. The resistance level is the level on the upward side where the selling pressure is high and doesn’t let the price move up that level.

It helps the traders to buy at the support level price and sell at the resistance level price and earn profit out of it. If there is a price-breakout for any stock having very strong support and resistance level, then it indicates a further price movement in a similar direction.

For instance, the resistance level of ABC stock is Rs. 1000 and for a long-time, it was trading below Rs. 1000. However, now the price has finally reached Rs. 1010, this means the resistance level has been broken. This indicates a further price rise for ABC Company’s stock.

Are you interested in Technical Stock Analysis and want to make your portfolio much stronger. Check out our course here

 

7) 8 Tips on How to read a stock chart

As you know by now, the important things to check in a chart, let’s try to read the chart given below. It is a Tata Motors Ltd. chart on 27th of July, 2021.

 

How to read a stock chart?

 

1. It is a candlestick chart
2. The opening price for today is Rs. 293
3. The last closing price was Rs. 292.5
4. This means it opened today at a higher price than last trading session
5. The volume of trading is 25.6 Million
6. The 50-day moving average is Rs. 325.63 while the 200-day moving average is Rs. 262.03.
7. The price has cut 50-day moving average from above which signifies a bearish trend and as you can see in the chart, the price is dropping for Tata Motors.
8. The volume on the days when the price is decreasing is higher which also suggests a bearish trend.

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8) 6 Other IMPORTANT information you can find in a chart

 

1. Dividend yield:

In some charts, you can also find the dividend yield of the company. The dividend yield is the percentage of return on the dividend. This is calculated by dividing the dividend received annually by the market price of the stock at present.

 

2. Dividend per share:

Similarly, there can be dividends per share also represented in some stock charts. This is the annual dividend paid by the company to the shareholders.

 

3. 52-week high and low:

These 2 numbers are very important to the traders. You can find these 52-week highs and low often in most of the charts either at the top or the bottom.

The 52-week high is the highest price reached within the past 52 weeks or 1 year. Similarly, the 52-week low is the lowest price of the last 52 weeks.

 

4. Price to Earnings Ratio:

The P/E ratio may be also found on some charts as it is a key metric for stock analysis. It is derived by dividing the market price of the stock by the earnings per share (EPS) for the last year.

 

5. Net change:

This is another metric given in any stock chart and it is the change from the previous day’s price. In the chart given above, the net change is -0.25% which keeps on changing as the price of the stock changes.

 

6. Market capitalization:

Most stock charts also include the market capitalization of the company. This is the value of the total number of stocks outstanding.

For instance, if there are 1000 outstanding stocks of a company and the market price of each stock at present is Rs. 100 then the market capitalization of the stock at present is Rs. 100,000.

Do you want to invest for a long term goal? Read our complete article for long term investing here

 

Conclusion

So, reading charts is a bit tricky, however, you can learn to read them and then use them for your daily trading. If you want to learn how to read stock charts and pick stocks wisely and trade, then you can enroll in technical courses at Koppr.

Check all our stock market related courses here:
1. Stock Market Basics
2. How to pick stocks?
3. Futures and Options
4. Fundamental Analysis
5. Value Investing
6. Intraday Options Buying Strategy
7. Nifty Hedged Short Strangle
8. Options Spread and Options Chain
9. Learn how Scalp Trading Works, etc.

You can choose the course according to your interest and enroll for the same if you wish to learn about the different stock market strategies that can help you build your stock portfolio.

Charts can be extremely helpful in daily trading as they have all the required information in one place and you can just check everything on that single page.

Moreover, if you can integrate the technical indicators and use real-time charts, it can provide you with buy and sell signals too.

Moreover, like Benjamin Graham said in his book, the Intelligent Investor that “An intelligent investor is a realist who sells to Optimists and buys from Pessimists”. After reading all the stock charts, you will realise how true this quote is!

 

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22 Money Lessons From 5 Great Investment Gurus

22 Money Lessons From 5 Great Investment Gurus

You may be a self-made man or woman but you must have come across or are still in the shade of a mentor or a guru. Since continuous learning is imperative in the field of investment, an investor needs to follow the investment gurus and understand how they are making it in this ever-volatile market.

Here following doesn’t mean blindly following anyone but understanding the concepts, ideas, and then doing your own thing in your way.

So, in this article, you will read the following investment lessons from investment gurus across the globe. Then you have to make use of these lessons in a wise manner to get the most out of the market.

 

Investment Lessons From:

1) Investment Lessons by Benjamin Graham

 

a) Learn From your mistakes and never give up

The first lesson for prospering in any field is nothing but not giving up. Benjamin Graham, the writer of “The Intelligent Investor” and the mentor to the world’s most popular investor – Warren Buffet lost all his capital in the stock market crash of the year 1929.

The Great depression followed and made Benjamin Graham realize the risk of investing the hard way.

However, he didn’t quit, unlike many who just left the market post the crash and the depression.

He started analyzing stocks and investing in stocks that had a lower price than the actual market price. It is said that even after losing so much, he generated a 20% return on an annual basis on average with the proper money management and risk management skills.

Key Learning

So, it is all about learning from the mistakes you make. You need to “find” the right way, and then go ahead. Quitting is not just an option if you are serious!

 

b) Investing is not gambling or speculating

The second lesson from this great investment guru ever is not to take investment as gambling or speculating. Gambling or speculating can lead to short-term gains, however, that is not the right approach neither would it fetch you profits in the long term.

Investing is all about understanding your risk appetite and then investing the money for the long term according to your financial goals and ideal asset allocation.

Key Learning

As an investor, you should ideally understand where you would like to invest and then make an informed decision by knowing all the associated risks.

c) Finding out the real value/ Intrinsic Value

Benjamin Graham is known for his famous book on investment “The Intelligent Investor”. In this book, he has mentioned value investing and the concept of intrinsic value. Intrinsic value is the actual or real value of a stock. The market price can be according to different factors but the intrinsic value is derived from the fundamentals.

For instance, the market price of ABC stock is Rs. 1500 however after thoroughly analyzing the fundamentals of the company, you found out that its intrinsic value is Rs. 2500. Then you should ideally invest in that stock as sooner or later, the market price will reach the intrinsic value.

It can, however, be the other way round as well. Suppose the intrinsic value is Rs. 1500 and the stock is currently trading for Rs. 2400. So, it is overpriced, and at some point in time, the price would drop to Rs. 1500. The concept of intrinsic value is very crucial to understand for every investor.

Key Learning

Understanding the concept of Intrinsic Value and then investing according to the same is very important for any investor.

d) Reducing the downside risk factor

Another important lesson from this man is that an investor must consider the downside risk of the investment every time he or she invests. The downside risk is the maximum loss that an investment can incur given the worst-case scenario.

Key Learning

So, as an investor, you need to plan for such a scenario and then keep a margin of safety at the time of investing. The margin of safety is the difference between the market price of the share and its intrinsic value.

Note: Thus, the lower the intrinsic value than the market price, the higher would be the margin of safety and lesser downside risk.

e) Expanding your horizon

Benjamin Graham believed in value investing. His investments’ horizons were long enough to beat the short-term volatility in the market. He believed and it is a fact as well that market in the long-term would reflect the intrinsic value if not in the short-term.

Key Learning

So, as an investor, you need to expand your time horizons to realize the intrinsic value of an investment instrument.

Before every Financial Planning ask these 5 questions to yourself. Check out our article here

 

2) Investment Lessons by Warren Buffet

a) Invest in a business that you understand

Warren Buffet, the most popular investor across the globe, a student of Benjamin Graham believes in investing in businesses that he understands. He said that if you do not understand a business, and put your hard-earned money in it, you are not investing, you are gambling.

Key Learning

To invest wisely, you need to understand the business first, how it operates, its market, whether it has demand in the market or not, and other factors.

If you take a look at the Warren Buffet portfolio, you will find stocks of the banking sector, consumer goods, and others that are simple to understand.

b) Productive assets are the best investments

According to Warren Buffet investing in productive assets can be beneficial in different ways. It can provide a constant return, unlike idle assets which will suddenly increase or decrease one fine morning.

Warren Buffet is against investment in gold as that is an idle asset. For instance, the gold price rallied in the year 2020 due to covid-19 and reached an all-time high but then again it fell drastically.

Key Learning

The productive assets/ businesses can help you earn regular income as well in the form of dividends.

c) Diversify but within the right limit

As an investor, you must have heard many advising not to keep all the eggs in one basket. This is true enough, but keeping one egg in each basket would cost you a lot for the baskets as well which may wipe out all the profit.

As per Warren Buffet, diversification is good but overdoing it can reduce the value of your investment.

Key Learning

According to him, as an investor, you can plan your investment portfolio with bonds, mutual funds, equity, risk-free government investments like PPF and NSC, and others. Apart from these, there must be insurance for dealing with medical and life risks.

d) Don’t keep too much cash in hand

Cash is a bad investment as per Warren Buffet. You may think keeping cash is important for emergencies, obviously it is but a limited amount. If you keep all your money in cash and do not invest, you are doing it wrong as per Warren Buffet.

Key Learning

Since idle cash does not attract any return, which you could have otherwise earned if you had invested the cash in some profit-yielding assets – or even if you had deposited the same in the bank.

e) Stop being a part of the crowd

The stock market is highly volatile because most of the investors have a herd mentality. This means that if the market fell a bit, most investors would start selling and if it increases a bit, they start buying following others.

Key Learning

It is good to listen to others but following anyone blindly can be harmful. Warren Buffet never believes in this mentality. He rather believes in carving his way in the market.

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3) Investment Lessons by Peter Lynch

a) Accept your losses

“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” – Peter Lynch.

The first lesson by this great investor is to accept losses in the short term to gain in the long term. He believes in staying invested in the market for the long-term and do not get disturbed or distracted by short-term gains.

According to Peter Lynch, as an investor, you must avoid two emotional states of mind – one is a concern and the other is capitulation. It will help them become successful investors in the long run. When there is a market correction, most investors become concerned and do not act wisely. Market corrections are great opportunities to invest at a lower price.

Key Learning

So, as an investor, you must keep your concern out of the scenario and take advantage of the market correction, as advised by Peter Lynch. The second emotion is capitulation happens when the value of your investment falls drastically due to a correction in the market.

However, staying calm and invested in the market is what is advised by Peter Lynch as the market would turn around in the long run and all the losses in the short term can be wiped out.

Moreover, selling the investments due to market correction in the short term can result in a huge loss of capital as well.

b) What, Why, and When of investment

Peter Lynch advised that investors must understand what they are buying, why they are buying and when they are buying. Suppose you are buying ABC stock, you must understand what ABC Company does, their business.

Then you must find out why this investment is good for your portfolio. Whether it is going to give you good returns in the long-term or not. Then the time or when you can buy ABC stocks. This is one of the most disciplined approaches of investment and wise too.

Key Learning

When you invest accordingly, you may not become a billionaire overnight but surely get good sleep at night as you need not worry about your investments much.

c) Early investments are good but not too early

Peter Lynch said “I often think of investing in growth companies in terms of baseball. If you buy before the line-up is announced, you’re taking an unnecessary risk.” This means that an investor must not jump into any investment too early.

For instance, a new IPO is coming into the market, and without knowing much about the company, just to invest at a lower price, you apply for the IPO.

Key Learning

If you are aware of the company, its business, its business plans, then investing in the business is feasible. However, investing too early can be risky without knowing the details of the business and prospects.

 

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4) Investment Lessons by Rakesh Jhunjhunwala

a) Look for companies with a competitive edge

The first lesson from the very own Rakesh Jhunjhunwala, India’s biggest and most famous investor is that you must invest in companies that have a competitive edge. It simply means that the company is having some sort of upper hand over its competitors.

For instance, in CRISIL, when Rakesh Jhunjhunwala invested in this credit rating company, most of the investors, traders were scratching their heads as why Jhunjhunwala invested in a credit rating company.

That was back in 2002 when credit rating was kind of a new concept in India. Soon, the reason got pretty cleared as the company flourished and CRISIL ratings become an integral part of many businesses. His investment grew drastically from Rs. 200 at which rate he bought the stocks.

Key Learning

There are many credit rating companies in the country, but CRISIL is the name that reckons with credit rating in India and that is the competitive edge.

b) Trading or investing or both

This is a question that every stock market enthusiast scratches their head upon at least once in their lifetime. However, Rakesh Jhunjhunwala made use of both trading and investing for where he is now.

When he started in the stock market, he had very limited capital. So, he started trading, which gave him short-term profits. He then accumulated all the profits in the short term and invested the same for long-term gain.

Key Learning

So, his advice to the investors of this generation is to build the capital by trading stocks and then using the capital to invest and accumulate wealth in the long term.

c) Patience is the key

Rakesh Jhunjhunwala never sells his investments unless the fundamentals of the company become volatile. He invests in business and thus even if the stock price of the company is dipping, he doesn’t care.

However, if the fundamentals of the company go wrong or alter, then he sells. This requires immense patience to hold stocks that are giving negative returns. But that is what makes him a great investor.

Key Learning

So, when you are investing, keep your patience level high this is what Rakesh Jhunjhunwala would advise.

d) Learn don’t regret

Another lesson by Rakesh Jhunjhunwala which fits perfectly for investment as well as life is not to regret but learn. Learning from mistakes is the key to becoming prosperous.

Key Learning

If you keep on regretting your losses, you would not be able to move forward. Instead, evaluate what went wrong, rectify, or do not make the same mistake again in the next investment. This way you grow and your investment skills become better.

e) Being passionate about the stock market is what you need

The stock market is not just a 9 to 5 job where you go just to earn money. It is something where your passion is required. You need to be a focus on the job itself, researching stocks, analyzing them, comparing them, reading the fundamentals and everything must be your passion. Rakesh Jhunjhunwala always says that to become a successful investor, you need to learn as much as possible.

Key Learning

Learning about the stock market would give you the best competitive edge on the business.

 

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5) Investment Lessons by Vijay Kedia

a) Uncertainty is part and parcel of the stock market

Vijay Kedia, another reputed investor from India believes that market will always be volatile and as an investor or trader, you need to deal with it. He also believes that no one can predict the stock market completely. It can take a complete 180-degree turn anytime.

Key Learning

So, planning for the worst-case scenario is important at the time of investment. He also advises that as an investor, everyone must do their research and do not believe people claiming that they can predict the market.

b) Evaluate the management of the company

While most investors are more concerned about the numbers, Vijay Kedia also stresses the qualitative aspects of the company. Management decisions affect the company’s profit and growth hugely.

Key Learning

So, understanding the management, their decision-making abilities is very crucial for every investor. The company you are investing in must have a sound management team. This would reduce the cost, and optimize the profits. This in turn would increase the value of the company.

c) SMILE

Yes, SMILE is the key to successful investment according to Vijay Kedia. SMILE stands for
S – Small in size
MI – Medium in experience
L- Large in Aspiration
E – Extra-large in market potential

Key Learning

This signifies that choosing small companies with great potential is based on management and operations.

d) Review your investments

Vijay Kedia advises continuously monitor and review your portfolio. He says that periodically reviewing the investments, the fundamentals of the company, and management’s decisions are important.

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Key Learning

If the fundamentals of any company seem changed for bad, then the investor must drop that investment from his portfolio.

Conclusion

Investing requires patience, continuous learning, and motivation. Being aspired by famous investors, and understanding their moves in the market, their ideologies can fetch you great returns.

However, no one should follow anyone without doing their research. This is the most important lesson that every genuine and successful investor would give you.

 

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