Stock Market Investing: 7 Proven Ways to Start Today

Introduction

The modern financial world has made it possible to earn a lot of money through stock market investing, but while it may be more accessible than ever, it is still daunting to most. With a simple smartphone and internet, millions of people can take part in the stock market, but the majority of people opt not start, or start with the wrong method.  

When it comes to stock market participation, there are two categories you can consider: investing and trading. While both investing and trading are stock market participation methods, they are not the same. Each method requires a different mindset and carries a different degree of risk. 

In this case, most beginners are setting themselves up for failure by trying to rely on riskier methods. Certain methods are geared towards building your wealth over the long term, while others are geared towards creating a more constant claim to active income through short-term and constant price shifts.  

Before you start losing your money, it is important to understand the difference between wealth-building investing and active trading. In this guide, you will learn about 7 ways to start stock market investing, and the pros and cons of each method, and more importantly, the target audience of each method.  

 

Why You Should Start Investing in the Stock Market

Investing in the stock market for the first time to stay ahead of inflation is more like starting to save money for the first time in your life. Equity is the only thing that grows with inflation.  

The stock market also allows you to create long-lasting wealth from your own wealth. Compounding is one of the greatest money-creating mechanisms or methods. If you own shares in a company with a high stock value, then your stock value will go up. This means that your stock or the value of your share will continue to increase over many long-term periods.  

The only thing to be concerned about is setting your goals. If you set your goals high, there is a good chance that you will achieve them, but if you set your goals low, then your strategies may use up capital and your goals will remain far from your predictions.  

Way 1 – Direct Equity Investing (Stocks)

• This means buying and owning shares of businesses and purchasing their stock for the long term.  
• The owner in this case is not a trader; people don’t just bum around and watch the business value go down or up.  
• There are some people who decide to even sell their businesses so that the value of their stocks doesn't go down.  
• The ability to increase wealth in compound value is a sky. Invest with a successful stock market.  

Even smaller annual yields present the owner with a great increase in wealth. This method must be conducted with great tolerance, fundamental analysis, and emotional control, but it remains one of the most effective ways of investing in stocks as long as it is done correctly.  

Way 2 - Mutual Funds

A Mutual Fund is an investment strategy that involves the amalgamation of the funds of different individuals and investing them in a pre-defined strategy across several stocks, bonds, or other marketable securities.  

There are active mutual fundsand passive mutual funds. Active Mutual Funds involve a Fund Manager selecting the stocks to outperform the market, while in Passive Mutual Funds, the stocks and other marketable securities are left to just track a market index.  

Lessening the individual stock risk and removing the burden of daily decision-making is a total benefit.

The large majority of Mutual Funds are geared towards novice investors. This is because the Mutual Fund lends professionals, as well as cost and investment ease, to track the market.

 

 

Way 3 - ETFs (Exchange Traded Funds)

An ETF, or an Exchange Traded Fund, is a type of Mutual Fund that has characteristics of a stock, one of the most important being to trade.

One more plus for Investors is the cost. Most ETFs follow strategy indexes, thus carrying a marginal cost compared to the majority of Mutual Funds.

Their transparent structuredisplays assets held in the fund. ETFs are good for cost-conscious investors who do not want the hassle of picking stocks.

Way 4 – SIPs (Systematic Investment Plans)

SIPs promote disciplined investing for all markets because investors agree to invest a predetermined amount at specified intervals into a fund.

SIPs also mitigate the market timingrisk due to rupee-cost averaging, where investors buy a larger volume of units in less favourable markets and then purchase a smaller number of units when markets are favourable.

For those new to the markets, SIPs are a great way to invest in the stock market because they promote a long-term investment horizon and eliminate emotional decision-making.

Way 5 – Intraday Trading

Buying and selling shares for a profit in a single trading day is termed intraday trading. It revolves around the concept of making a profit in a very short time by using the

Though promising quick profits, intraday trading is very risky and requires a multitude of market skills, is market based and high market knowledge, quick and firm actions, managed risk and a lot of emotional control.

Due to the high volatility, many newbies end up losing because they overtrade and misuse leverage. This is not a good method for long-term wealth creation and is for the risky short-term traders.

 

 

Way 6 – New Fund Offers (NFOs)

NFOs allow investors to enter mutual funds at the start of their offer period (this period is usually one month). Although they give investors the peace of mind of being able to invest at the start of the offer period, the price at which investors can enter does not mean they will be cheaper or better in the long run.

NFOs do vary. Some NFOs are remarkably similar to funds already on the market, making little more than a cosmetic change, resulting in more funds that more confusingly mirror the funds already on the market.

NFOs have the potential to offer new or especially unique investment opportunities. Still, beginning investors should invest their funds elsewhere, as NFOs can be more trouble than they are worth.

Way 7 – Derivatives Trading Using Option Chain

 

What Is an Option Chain?

An options chain is a listing of call and put options associated with a particular security. It is the combination of a strike, an open-interest (OI) value, a volume value, and an implied volatility (IV) value. An options chain is the most comprehensive analytical tool available to the market.

How Traders Use the Option Chain

An options chain can be used to isolate the signals in the market to give the analyst an idea of what the market is feeling and the strategies the market is employing. An options chain signals the market feeling by constructing the market.

There are multiple strategies, such as covered calls, spreads, and hedges, that can be used by an analyst in any single market. An options chain can be used extensively to predict the movement of the price in the short-term (although the long-term investment value is not available).

Risks of Trading Using Option Chains

Options involve leverage, which means if prices ever move slightly in the wrong direction, the position will lose value quickly.

Because of the complexities involved in the process, derivatives trading is not suitable for beginners. Due to the misuse of options, this can lead to serious loss of capital.

Investing vs Trading – Know the Difference

Investing is about long-term ownership of a business and its progression over time. It is steady in its growth and a process that can take years, even decades, to achieve.

While trading focuses on short-term price movements. This means lots of time is spent monitoring prices and making quick decisions which involves a great deal of technical skill. Risk is much higher and the outcome is less predictable.

Knowing the difference allows investors to determine which strategies are best suited to their financial goals and mindset.

Who Should Avoid Intraday & Options Trading?

Beginners should eliminate options and intraday trading from their strategy if they do not have the experience, discipline, and capital protection strategies.

Investors looking to build a long-term wealth plan and a financial stability plan, rather than quick profits, are the ones who ought to prioritise investing over trading.

Common Mistakes Investors & Traders Make

• One of the biggest mistakes is thinking that options chain analysis is the same as investing. Options are not investment tools; they are for trading.
• Another even more common mistake is overtrading, which is often the result of emotion or greed. Repeating losses time and again can result in a loss of capital and transaction costs.
• Disregarding risk management, such as position sizing and stop losses, tends to cause irreparable damage.
  
  

Tools Required to Participate in the Stock Market

• Starting to invest in the stock market requires having a demat and trading account to store and carry out transactions involving securities.
• Some basic charting software is needed for price trend analysis, and options chain analysis software is needed for trading in the derivatives market.
• Using quality software improves the quality of your decisions and minimizes the chances of making mistakes.

 

 

Conclusion

Trading is risky, and investing is how you build wealth. You should begin with basic and safe strategies like investing in mutual funds, ETFs and starting a SIP. Over time, and with more experience, you can begin to employ more complex strategies. The stock market takes more time, patience, and effort to learn, and less to guess.

Having the right mindset and starting today can greatly improve your financial situation over the long term.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.