Stock-picking guide for a beginner - Business2Business

Suhani, a young earner, believes that investing in stocks will be a great way to build wealth. For long-term investors, stocks are a good investment even during periods of market volatility; A recession in the stock market simply means that many stocks are available at low prices. As a beginner, You should start by opening a Demat account, which can then be used to buy stocks or mutual funds. There are several ways to approach stock investing. Suhani wants to choose the option that represents the best way to invest and how she would like to choose stocks.

Suhani can choose to be a hands-on investor, choosing her own stocks. Otherwise, she can choose an automated advisor, which is a financial service that offers low-cost investment management. Most brokerage firms provide these services, which will help them invest according to their stated goals. Robot advisers are experts who provide advice in the selection and investment process. Generally, to invest in stocks, she needs a Demat account with a brokerage firm. You'll want to rate brokers based on factors such as costs (trading commissions, account fees), investment selection, and investor research and tools.

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For most people, investing in the stock market means choosing between two types of investment: Equity mutual funds or exchange-traded funds. It is possible to build a diversified portfolio from many individual stocks, but it requires a significant investment. The positive side of mutual funds is that they are diversified in nature, which reduces your risks. Mutual funds are unlikely to rise meteorically, as some individual stocks can. The silver lining of individual stocks is that smart choice can pay off, but the odds that any individual stock will instantly make them a fortune are pretty slim.

Suhani also needs to budget for her capital investments. The amount of money she needs to buy an individual share depends on how expensive the shares are. Share prices can range from a few rupees to a few thousand rupees. Mutual funds generally have a minimum SIP of Rs 500. You can put a relatively large portion of your portfolio into equity funds, especially since you have a long-term horizon. The best thing to do after you start investing in stocks or mutual funds may be the hardest. You should not look at them unless you are trying to beat the odds and be successful in day trading. In general, it is recommended that you avoid compulsively checking stock performance multiple times a day, every day.

Once she invests in stocks or mutual funds, Suhani should review her portfolio several times a year to make sure it stays in line with her investment goals. If your portfolio is very heavily weighted in one sector or industry, you should consider buying stocks or funds from different sectors to build a more diversified portfolio. You can also consider geographic diversification (via International Equity MFs) for effective diversification.

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