How to invest in Stock Market - EARN WHILE YOU LEARN | How to earn money | Easiest way!!!
If you put ₹ 1 lakh in education you will get a certificate.
If you put ₹ 1 lakh in FD at 7%, it will become 2 Lakhs in 10 yrs & 2 months.
If you put ₹ 1 lakh in good stocks, it will become minimum 10 Lakh in 10 yrs.
If you put ₹ 1 lakh in best stocks, it will become minimum 1 CRORE in 10 yrs.
Financial education is very important and a must for everybody - male or female - but unfortunately it is not taught to students in school or colleges. Children have no idea of how to earn money. Many of the parents too do not understand Financial Education. Most parents feel that getting a job is the only way to earn money.
Many feel that migrating to another country is the only way to earn more money or live a comfortable life.
It is very easily possible for students to earn money (after the age of 18) by investing for Long Term (3 to 10yrs) in Stocks. It is better than any "online/part time jobs" that are offered. Students can use this knowledge to advice elder people who are not tech-savy on how to earn more from their savings. Warren Buffet started investing in stocks from age 11.
Some Stocks give much higher dividends than you would get in Fixed Deposits. But not all high dividend paying stocks are great companies. As you can see in the table below all except the first 2 are Government owned companies:
Investing in stocks has become so easy today that it is as easy as ordering food or taxi online.
What is a Stock or a Share?
A Stock or Share is digital note or certificate belonging to a Publicly Listed company. It denotes the ownership of a company. The more share you own the more of the company you own. Many company owners (promoters) do not want to give away more than 30% of total company shares to public because they fear some other company could buy the shares from the open market and take over the company.
A share can have Face Value of Rs 100 but its market value could be Rs 1,000. The market value of stocks of each company keep changing by the seconds during trading time.
HOW MUCH CAN ONE EARN IN STOCKS?
Real Life Examples:
In stocks a person gets multiple income like:
* Dividend, bonus (number of stocks held doubles),
* Increase in stock price (historically it has been between 9% to 23%)
* Bonus Shares. 1:1 Bonus means if you have 100 shares you will get 100 more shares free of cost. This also means your "principal" DOUBLED. It also means your NEXT dividend will also be double.
* Stock splits, etc. In a stock split 1 share of Rs 100 could become 10 shares of Rs 10, which could in a short time move upwards once again to Rs 100.
So in short, almost every year the principle also increases and the dividend also keeps increasing. Thus stocks have the highest value of compounding. Meaning stocks compound the fastest of all assets. See below examples:
Rs 1 Lakhs invested In MRF in 10 yrs became 13 Lakhs
Rs 1 Lakhs invested In Minda in 10 yrs became 1 Crores,
Rs 1 Lakhs invested in Infosys in 25 yrs became 1 Crore.
Invest in Stock Market: If your country has a stock market then it is very important to invest in it. Money in Fixed Deposit gets the lowest rate of return. FD = Fool's Deposit.
A student above 13yrs of age can easily learn about stock market and teach or show their parents about how to invest in stock market, how to open Demat Account, which Apps to use and which instruments offer the highest rate of return.
Interest on Fixed Deposit in India has been continuously falling over the last 20 years. See below graph:
Investment in Fixed Deposit vs Gold vs Real Estate vs Stocks:
If you put Rs 100 in Fixed Deposit at 7% interest the bank will pay you Rs 7 after 12 months. (That too only if you don't touch it for 10yrs). If you break your deposit before 10 yrs the Bank will pay you half of that or even lower.
Investment in Gold barely doubled in 10yrs. What was Rs 3,000 in Yr 2013 touched Rs 6,000 in Yr 2023.
Real Estate also gives similar rate of returns as a Fixed Deposit or Gold. All of them double the amount invested in 10 years time. Real Estate is worst of the 3 because:
a)You have to invest a very big amount like 50+Lakhs at one go if you invest in a flat or land.
b) You will also generally need a Loan. So if you calculate the interest paid on loan it will be almost equal to the first 10year capital appreciation. Meaning for the first 10yrs (assuming you paid off the loan in 10yrs which generally is the trend) you did not get any benefit. Add annual tax & monthly maintenance expenses. Most people forget to calculate this.
But it does provides emotional stability & happiness to have your own house.
Only if you are renting out the property will there be any real MONETARY benefit. But then you have to go through the headache of attending housing society meetings, renewal of Rental contract and even negotiating for an increase in rents every year.
Sometimes the payments are late sometimes there is default. Whenever there is default you will need to go through the process of eviction of tenant. Real Estate is not a "very-passive investment".
Real Estate is good for people who want to collect rent by way of cash.
Investment in Real Estate, Gold & Fixed Deposits doubles in 10 years.
In Stock Market it doubles almost every 3 yrs.
Stock Market Investment:
If you bought ABC company share at Rs 100 the price could become Rs 110 tomorrow itself or in a week. It could also reduce to Rs 90 but over a longer period stock markets have always given an average return above 15%.
In stock market if a company earns 10% profit the shares of that company can increase or decrease by 25%. This happens because of the activity of short term traders combined with general market sentiment. Over the long term it is very profitable for the investors.
On an average Stock Price double every 5yrs. Some stocks double every 3 yrs and some stocks even faster. eg Ruchi Soya (now Patanjali Foods ltd) which was priced at Rs 650 in primary market and it listed and at Rs 1,040.
Investing in stocks is the most easiest and fastest way to earn money.
This is no click bait. Its as simple as buying 1kg Onion from shop.
Only difference is it is much more easier than buying onions and you keep track of the history of when the price is high and when the price is down.
If the price of Onion in Mumbai falls below Rs 20 then people in Mumbai stock a lot of onions in their house and when the price of Onion crosses Rs 40-50 people start making food with less onion.
Its the same with stocks... for long term investors... buy when the price falls... except stocks are not perishable commodity like Onion. Some Stocks also have the habit of multiplying frequently (also called bonus).
How to Buy Stocks?:
There are 3 ways to buy stocks - Intraday, Short Term & Long Term. The first 2 are quick but very dangerous while 1 way to buy long term is the safest.
Then there is Futures & Options. Don't even go near it.
Most of the people who have lost money in stock market are people who have done Intraday, Short Term & Futures & Options.
Its difficult to lose money in long term investing (10yrs) irrespective whether you bought when the market is high or low because it crosses that price point in less than 3 yrs. But it is always advisable not to enter the market when it is at its peak.
A. Intraday Trading:
Intraday trading, in simple words, in buying today and selling today. Buying and selling have to occur within one trading session on the same day. For example, a trader buys a stock XYZ for Rs 100 at 9:25 AM and sells XYZ for Rs 102 at 12:45 PM.
Imagine he had 1,000 shares so he made a profit of Rs 2,000 that day.
Imagine he did it 5 times that day. Then he makes 10,000 that day.
If he did it even 10 times a month he will be earning Rs 100,000 even while being at home.
The above is IDEAL SITUATION... but in real life this NEVER happens. Many times illegal cartels are formed to do this in a very planned & organised way with involvement of many people and a lot of funds.
They pump in cash to create artificial "trends" to trick the common man. So if you play this game you will be playing against a big & powerful player and you can never win big.
Avoid Intraday trading ALL TOGETHER because it is very risky and LOSSES COULD BE HUGE. Because there could be huge loss in a day and at the end of the day you have to pay the loss... whatever it may be.
B. Short Term Trading
Short Term Investors buy when the price is low and sell the moment they make 10% to 12% profit. Usually it is Buy Today and Sell Tomorrow stocks. They plan to do it at least once a month or at least 3 times a year. If a short term trader sees that he is making a profit of 10% most traders will sell.
In both the above cases Stocks are picked based on their current "market-momentum" or "rocket" stocks and not based on their real value or future business prospect.
In Short Term Trading the goal is to Buy a stock as it rises and sell it as it falls.
The BIGGEST problem of Short Term Trading is NOBODY is able to time the market to get in exactly as it rises and get out exactly as it falls. Not a single person has till now and no one will ever be able to predict the peak and the low points.
If you have ever heard of people who have "LOST THEIR MONEY IN STOCK MARKET" it is the above 2 category & F&O category.
SEBI Data says 90% of short term traders loose their money. Even from those 10% who make money... even those people loose it all before they leave this world. Because short-term trading is like gambling... and "gut-feeling"... and involves placing huge amount of money on very few stocks.... and then repeating it almost daily.
C. Long Term "INVESTING"
Long Term INVESTORS hold the position for 3yrs or 5yr or 10yrs. Some people, like the company owners (Promoters), never sell their shares because they know (looking at track record or history) the price will be ten times it is today.
Not only the value but also the number of shares of Cash rich companies multiply rapidly on its own via bonus issue or stock split. This multiplies dividend earnings.
Some long term-ers double their holdings or at least buy more of the same stock again when the stock market falls 10% during bear fears.
On the other hands when the market is in a bull run they save the money in their banking account and wait for the fall. Usually once or twice in a year the Index falls 10%.
LONG TERM INVESTING is the safest way to invest in stock market. The only way one can lose money in long term investment is:
i) If company stock price plunges suddenly and never recovers..
ii) If company has huge debt and had to sell it - most long term investors avoid companies with debt.
iii) Unpredictable situation.
All the above conditions are very rare.
Almost all long term Investors make good money.
Real Life Short Term Example:
Suppose you bought Tata Motors for Rs 250 in 2001.
After 2 months it touches Rs 300. What would you do? Short Term guy would sell.
Then it moves to Rs 400. What would you do? Buy or Sell?
Then it touches Rs 500.
Then after a few weeks falls to Rs 400. So what do you do?
A long term guy would still be holding and suffered no loss. Profit or Loss is calculated only once you sold.
The guy who sold at Rs 300 will have to come back to buy it at Rs 400, Rs 450 or Rs 500 thus giving up all the profit he earned.
It becomes profitable for a short term guy to buy the share when comes back to its initial buying price of Rs 250. This seldom happens.
So the short term guy attempts to get much lower margin and trade more frequently. This is time consuming and needs a lot of market study and understanding.
Q. So how do you invest in Stock Market?
Answer: By following the below 5 simple steps you too can start earning above 15% on your investment.
Step 1) Open Demat Account ASAP:
We strongly advice every student to apply for a Demat Account as when he/she reaches 18 yrs of age.
If he is not yet 18yrs he/she can learn about stock market and advice their parents on where to invest the money to get the best returns.
Demat account allows people to invest in high returns investments like:
NHAI Bonds which give above 8% monthly pension-like returns
REITS (Real Estate Investment Trusts) and
Corporate NCD and
Stock Market where the returns are 10% and sometimes above 20% yearly.
Apply for Demat Account with Zerodha:
Click link to apply for a Demat account with Zerodha, without even visiting any bank or office in just 15 minutes by sitting in your home or office.
You will need:
1. Aadhar Card,
2. Pan card,
3. Pen,
4. Blank Paper &
5. Mobile phone ready with you.
There is no brokerage for share "delivery" is free.
For Intraday trading the charges are 0.03% (BUT AVOID INTRADAY TRADING)
Advantages of having Demat Account:
Get more income than FD by investing in:
1. Stocks: 15%-20% (add bonus shares + stock split + dividend + trade)
2. Invest in Sovereign Gold Bonds (increase in gold prices + 2.5% interest)
3. Invest in REITS (Real Estate Investment Trusts) 10-20% total returns
4. NHAI Bonds 8.50% returns paid monthly to your account.
5. Corporate Fixed Deposits & NCDs 8% returns.
Zerodha Tutorial by Pranjal Kamra - get full video here
Part-1
Part-2
STEP 2). Download Stock Market Apps
The best part is that today technology has enabled you and gives you the latest update about all stock movement and they even give detailed market research on your smartphone. Download these Apps and get a feel of it.
Download Apps like:
MoneyControl App, Learn to use MoneyControl App on Phone and on Laptop
Example of using MoneyControl for Trading
Screener App, etc.
Best part you don’t have to pay for these app and don’t even have to invest in the market. You can use these apps to understand and study the market before making any investment in them.
STEP 3) Learn before you invest
You can learn 80% about Stock Market within 3hrs by watching below videos:
Watch the following videos to learn about stock market. What one video at one go. You don't have to finish it all on the 1st day. Watch 1 video every day.
Watch it like you attend a class. Sit with a book & pen in hand, pause the video when you write down & rewind if you missed some part. The more such videos you watch the better you become:
Dr. Vivek Bindra’s Stock Market Videos:
· Video 1: https://youtu.be/sbdW1yy8GxU (40 minutes)
· Video 2: https://youtu.be/6rUovK92M5g (17 minutes)
· Video 3: https://youtu.be/L_iJCNzDe-s (15 minutes)
· Video 4: https://www.youtube.com/watch?v=-80PDEJQpns (5 minutes)
CA Rachana Ranade Stock Market Videos: (1hr & 35 minutes)
https://www.youtube.com/watch?v=roPVYvWLZCc
STEP 4) Transfer funds to Demat Account:
Transfer Funds to your Demat Account via UPI or CREDIT/DEBIT Card.
Start small. Don't transfer more than 10,000 if you are new and until you get confident.
STEP 5) BUY/SELL stocks or other instruments.
Start small. Get the hang of it. If your are new start with Rs 1,000 or Rs 5,000.
As you gain confidence you can increase your investment.
Try not to sell before 1 year. Although it will be very tempting when there is huge profit or sudden fall in the market.
Invest in at least 3 of the below instruments (All of them give higher returns than Fixed Deposits):
Stocks,
Bonds &
Corporate Fixed Deposits,
REITS,
Non Convertible Debentures
What is Sovereign Gold Bonds?:
What is REITS?
FOLLOW THESE 10 GOLDEN RULES:
1. INVESTING IS EASY - TRADING IS NOT... AVOID TRADING.
2. NEVER PUT ALL YOUR MONEY IN ONE STOCK.
3. ALWAYS BUY BLUE CHIP STOCKS.
4. NEVER TAKE A LOAN TO BUY STOCKS.
5. INVEST IN MULTIPLE SECTORS AND NOT JUST ONE.
6. DON'T HAVE MORE THAN 10 COMPANY STOCKS.
7. DON'T HAVE LESS THAN 10 COMPANY STOCKS.
8. ALWAYS ANALYSE THE FUTURE PROSPECTS OF THESE COMPANIES.
9. SELL THE STOCK IF YOU FEEL THE COMPANY IS LAGGING BEHIND ITS COMPETITION.
10. AVOID PUTTING MONEY ON PENNY STOCKS.
Why to invest in Indian Stock Market?
Asset vs Liability: Is buying a House an asset or a liability?:
Whenever you spend your money always ask yourself "Is it an Asset or a liability?". If it provides an income it is an asset. If it creates expenses it is a liability.
eg:
Buying a car is a liability.
Buying a average priced phone is an asset (since you follow stocks on the phone)... buying an expensive phone is a liability. Also every 5yrs a phone needs to be replaced so phone is one of the biggest expenses of modern human.
Buying a house to give out on rent is a asset.... buying a house to live-in is a liability...
Similarly "Life Insurance" is an asset as you get back your money after the term period. The average rate of income on this is similar to FD rates.
While "Term-Life Insurance" is a liability because you do not get back any money you paid and money is paid only on death.
Simply put asset brings in cash... liability takes away cash.
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