Have you ever considered to learn stock market? Set yourself up with a few stock market courses? Why do you think it is important and why are we bringing this point up?
Well, we will find all the answers in this detailed review on specific considerations you must be taking care of, while you are looking to learn stock market.
Financial security is one of the most important requirements for anyone in today’s world. It has two aspects – the first one is earning as much as one can and the second and equally important aspect is to grow the wealth one has created for his / her family.
The conventional methods of saving money and growing are outdated now.
The rate of interest one gets in savings and fixed deposits or recurring deposits is too low and can hardly balance the inflationary pressures. Therefore, it becomes very important to know other ways of getting good returns on one’s investments. To invest and to learn stock market is one of the best ways of doing that.
Now, let us try to understand why is it really important to learn stock market.
Share market investments and trading come with a certain amount of risk. The returns from trading in shares and currency trading are not risk-free. If one does not invest or trade carefully in stock markets, one runs the risk of the complete capital wipeout.
But that can be easily avoided by being as careful as possible while investing and gathering as much knowledge about stocks as much as possible. One should learn stock market to minimise that risk factor which comes along the nature of investing in stocks.
That risk can be minimised by knowing the basics of how stock markets work and what strategies one can use to trade and avoid losses.
5 Considerations To Learn Stock Market
Let us now try to understand the 5 most important things to consider to learn stock market. Remember, you need to take care of all of these considerations. Picking and choosing based on your convenience are only going to bring concerns sooner or later:
1. Keeping Financial Objective in Mind
Before deciding what instruments to choose form financial markets to invest in, one must have a financial roadmap ready for himself/herself. The roadmap will depend on many factors such as:
Current income and anticipated future incomes
Any liabilities like education loan or any other loan that needs to be paid off
Future Requirements and their Estimated Amounts
The first step is to think about all the above-mentioned points and make a financial plan ready for himself/herself. One should plan and try to learn stock market after keeping all these things in mind at every point of time.
This will help you to understand your current financial positioning and any potential future requirements. With this understanding at the background, you can choose the specific segment to invest in and learn about.
2. Learning About Different Styles of Investing and Different Stock Market Instruments:
While investing in stocks, one can belong to either of these 2 major categories (can be both as well):
A trader is one who trades in stocks for short terms. She/he needs to be updated with stock prices on an hourly or daily or sometimes weekly basis.
Traders need to know the basics of technical analysis of stocks. Also, they should know the basics of derivative trading for making better strategies and hedge their risks. One needs to keep this in mind when he / she starts to learn stock market.
A knowledge about futures, options and all the strategies involving these can act as an added advantage.
An investor is one who invests in stocks for medium to long term.
An investor does not have to be updated with day to day prices of stocks as he is probably not working full time in the stock market and have another major job to do. He / she cannot sit on the computer screen the whole day to trade.
With the help of these, one may be able to predict the direction of a company’s share price in the medium to long term. Therefore, once an investor invests, he starts thinking in terms of weeks or months or maybe quarters.
It is important to know the category to which a person depends. This is because knowing this can help a person decide which stock market courses to take in order to be able to start working in the direction of one’s trading or investing style.
3. Understanding One’s Risk Profile
Now, this is one of the most important things to consider while investing in order to feel financially secure at every moment in your life. The kind of risk one wants to take depends on many factors like age, preference, liabilities etc.
But once a person can decide the amount of risk he / she is willing to take with money, one can decide the amount of money that can be dedicated to learn stock market and invest money in it.
One should have perfect clarity in mind regarding one’s risk appetite.
This risk profile is ultimately going to decide the kind of stocks one would like to invest and the numbers of stop losses one will take in trades done in stocks. For example, investing in biotechnology companies’ stocks is considered to be quite risky.
New experimental drug fails 85% – 90% of the times. With them, companies may also fail. Therefore, the risk with such stocks is enormous.
But at the same time, the chances of getting exponential returns from their stocks in a relatively short amount of time are also good and a possibility.
4. Learning About Different Financial Products
After having clarity in terms of one’s financial goals, risk appetite etc., one should start learning about various financial instruments that are available at one’s disposal.
This is a complete fact in financial markets. The riskier an instrument is, the more profits/losses one will make. According to one’s risk appetite and life situation, one can make a decision to invest in one or some of the many options available.
Some of the options are stocks, mutual funds, Systematic Investment Plans (SIP), insurance, post office schemes, etc. It is advisable to allocate one’s wealth into a balanced mix of instruments. The risk appetite of a person also determines whether he / she would like to invest in riskier instruments or safer ones.
There are many professionals who can help one in figuring out one’s finances and use of funds to invest in different financial instruments.
If one has a certain amount of money that he / she thinks can be invested in stocks, then, to learn stock market is absolutely necessary.
5. Taking Advice From Advisories
For people who are just thinking of starting to invest in the stock market, there are innumerable options of advisories available in Indian market which claim to provide the most accurate tips to invest and trade in stocks.
These options include stock advisors and even analysts that appear in news channels on television. One can receive stock related tips on emails and messages.
But the major problem with such advisories is that their tips are not good in quality and sometimes even outdated.
Moreover, they charge heavy fee which makes them a double disadvantage for their clients. One should not blindly trust any such tips given by either advisories or even stock analysts sitting in television shows.
One needs to learn stock markets with one’s own experience and understanding by doing due diligence and thorough research before investing or making one’s own strategies.
There is an app called Stock Pathshala which seems to be just right for this purpose of educating ourselves and making our own opinions. Its complete review and details have been covered in another article.
In order to grow one’s hard-earned savings, one should look towards financial instruments that are available in Indian markets. One should get absolute clarity in mind regarding one’s financial objectives and risk appetite.
On the basis of these two factors, one can make a decision about which financial instruments he/she would like to use. Stocks is one of the best financial instruments which has the potential to give quite good returns on one’s investments.
Stock is a double-edged sword which can make rags to riches story and at the same time do the quite opposite of that.
Therefore, if one decides to learn the stock market and invest in it, one should become educated in this field and must be cautious while investing.
The market is full of stock advisories and TV news channels who claim to give good tips regarding stocks to invest in.
But one should be careful and not depend on anybody else’s advice on one’s own money. It is imperative to develop one’s own understanding of the stock market.
We need to know one reliable source and a one-stop solution for all the education required for the practical implementation of all the theoretical concepts of investing and trading. Like mentioned above, one such source to learn stock market is Stock Pathshala. It is a mobile phone app and one should definitely take a look at its different offerings and how we can use it to our maximum advantage.
Stay aware, stay rich!
In case you are looking to get started with stock market trading, let us assist you in taking the next steps ahead: