Understanding the Stock Market: A Beginner's Guide to Entering the Market
Understanding the stock market can be a daunting task for beginners, especially when it comes to deciding whether to invest directly in stocks or opt for mutual funds. In this article, we will guide you through the process of starting investment and buying shares. We will discuss the importance of understanding the market, explore different investment strategies, and share insights from experienced investors.
Real-life Investment Experiences
Many individuals, like ourselves, have started their investment journey by exploring various investment avenues, including direct stocks and mutual funds. For instance, I have been investigating the stock market through mutual funds. Over the past few years, I have dabbled in shares of PayTM, Zomato, IRFC, LIC, IREDA, Sreeleathers, RVNL, and more. Although I made some losses, I managed to make considerable profits as well. However, these experiences have helped me gain a deeper understanding of the stock market, making me more cautious about direct investments.
Since December 2021, I started investing my money via monthly Systematic Investment Plans (SIPs) through the platform Groww. Initially, I started with a modest 10,000 rupees a month, which gradually increased to 25,000 rupees per month. My portfolio includes small-cap, large-cap, mid-cap, and flexible-cap funds, as well as a few thematic funds. While I am aware of the risks involved, these funds have been rewarding, with an XIRR of 33% over a period of 2.5 years. My portfolio shows a gain of 45%, which furthers the idea that a 12% return is achievable with the right investments.
Learning from Small Starters
Learning to invest can be intimidating, but starting with small amounts is often the best way to begin. Surya Someshwara, a successful investor, started with just 5,000 rupees and now manages substantial liquid assets, including stocks, gold, cash, and cryptocurrency. Surya aims to build a portfolio of 1 crore in stocks, crypto, gold, and maybe even a business within the next 10 to 15 years.
“Starting small allows you to learn and be okay with mistakes. We all will make mistakes at the start,” Surya emphasizes. “Starting small builds confidence to slowly add more capital and develop skills in managing risk, which will become crucial as your portfolio grows.”
Building a Solid Investment Foundation
Surya also highlights that generating income is essential before you can invest. “If you can’t make 5,000 rupees into 10,000 rupees, you can’t make 50 lakh into 5 crores!” he notes. This statement underscores the importance of financial health and the need to build a solid foundation before venturing into larger investments.
He further advises that generating an income is necessary. “If you can’t save, you can’t invest.” This is a critical point for many newcomers to the investment world, as it emphasizes the need for financial discipline and the importance of building a sustainable income before committing significant amounts of money to stocks or other investments.
Conclusion
Investing in the stock market can be both exciting and challenging. Starting small, learning from experienced investors, and gradually building a solid investment foundation are crucial steps in the process. Whether you choose mutual funds or direct investments, understanding the market and being prepared for potential risks are essential. As Surya rightly points out, ‘Everything starts small.’ Whether you start with 5,000 rupees or 50 lakh, the journey to building a significant portfolio is the same—small steps leading to great success.