Many of us wish to invest in the stock market but often lack the confidence to, begin with, stock market trading. Stock market trading is something that is not as difficult to understand as it seems to be, and anyone interested in learning stock trading can easily do so.
There are various modes through which one can learn about the stock market and about how to start with stock market trading. Moreover, there is no age to start with stock trading. You can buy your first stock even at the age of 16 years or when you cross your 40’s. The key, however, is to start trading earlier to get the benefits of compounding.
The other advantage offered by stock trading is that you can start investing even with small amounts of investments like Rs.500 by investing in SIPs or Mutual Funds. All that is important is to learn about stock market trading and be cautious while you are starting.
Why should you learn stock market trading?
The question that arises to most of us is that why shall we learn about stock market trading? What is the need for me to learn and start with stock market trading? Every one of us has some dreams we want to fulfill sooner or later in life. You need an adequate amount of funds to meet your dreams and make them come true. What is also essential is to plan so that you receive your money at the appropriate time. To achieve this, you need to allocate a certain portion of your income for investment to different financial instruments. There are a variety of assets like equities, bonds, debentures, mutual funds, currency, commodity, and so on wherein you can invest your money and earn returns.
Investing your money not only helps you earn a good amount of return but also makes you more disciplined and helps you in having a backup plan for your future or retirement.
Top 10 reasons why one should learn and start stock market trading.
- Stock market investments help you grow your money. Regular investments help you earn good returns over a period of time.
- Over a period of time, stocks are always seen growing. This is one of the strong reasons why one should start with stock market investments.
- By investing in the stock market and learning stock market trading, you can avail the benefit of compounding in the long term. By the power of compounding, your investments can grow way bigger than you expect them to grow.
- Stock market trading is also important because the cash left idle will start losing its value over a period of time. This is because of the rising rate of inflation due to which the purchasing power of money comes down.
- Investing in stocks generate higher returns than investing in other financial instruments like bank FDs, bonds, debentures, etc.
- Stock market investments are free from taxes. Avoiding tax can help you save much more than expected. Tax-free investments make a huge difference in the amount of money you earn.
- Starting stock market investments when you are young can help you create a corpus for your retirement. By investing in the stock market, you can create a tremendous amount of your wealth.
- Stock market trading helps you in diversifying your portfolio, which helps you in earning better returns and at a lower risk in the long term.
- Stock market investments help you in owning a part of the company you love.
- Learning stock market investments is also useful because it helps you in investing in sectors that you know well. By investing in sectors or industries, you understand well, you can significantly reduce the risk.
What is the stock market?
The stock market is the market where investors and traders can trade in different financial instruments like shares, bonds, debentures, commodities, currency derivatives, etc. A stock market is a mediator that allows the buying and selling of these instruments.
The Indian stock market is regulated by SEBI or the Securities and Exchange Board of India. SEBI works towards safeguarding the interest of the investors and different parties involved in the buying and selling of stocks.
Majority of the trading in India takes place through two major exchanges in the country: Bombay Stock Exchange or BSE and National Stock Exchange or NSE. All the significant companies are listed on any of the two or on both the stock exchanges.
Stock market trading in India takes place through the brokers. A stockbroker is a broking individual or an agency that is registered with SEBI and acts as an intermediary between the investors and the stock market.
When the client wants to place a trade for buying or selling the shares, the order is placed with the broker. The broker on receiving the order places them on the market. When the buyers and the sellers match in the market, the trade is successfully executed. There is no manual requirement now as the buying and selling of stocks, and other securities can effectively be done online.
Once the order is placed by the broker, it is processed by the exchange. When the buyers and the sellers for an order match, a confirmation is sent by the exchange to both the parties. This is done to avoid any defaults and frauds.