If you are beginning your journey in this world of Investment in Stock market then this is the Podcast Episode you need to hear.
[00:00:00] Hello everyone and warm welcome to this new episode on your podcast Smart Money Short Talks.
[00:00:12] I'm your host Kedar Nadgonde, a financial analyst and coach and today I will be telling
[00:00:19] you how you can begin investing in the stock market in a few simple steps.
[00:00:25] If you are beginning your journey in this world of investment in the stock market, then
[00:00:30] this is the podcast you need to hear.
[00:00:34] First let's understand the basics.
[00:00:38] Investing in a stock market basically means buying equity or buying a portion of ownership
[00:00:46] in a listed stock.
[00:00:48] A share is basically a portion of the ownership.
[00:00:52] So making sure you choose the correct companies to invest in is very important.
[00:00:58] Most common investor mistakes is investing on recommendation without actually making
[00:01:05] sure that the merit of the recommendation and information is valid.
[00:01:11] Think of it like this, when you buy a car or a bike, you will take recommendations
[00:01:17] from your friends and family.
[00:01:20] However, you will make sure that you do your due diligence about the model of the car
[00:01:26] or the bike, the size, the quality, the pricing, mileage, resale value in fact so many more details.
[00:01:34] Then why not do the same when you are investing your hard earned money in equity or stocks?
[00:01:40] Now I'm sure I've got you all thinking.
[00:01:44] I will be sharing the few ideas that can help you analyze if a stock is a good one which
[00:01:50] can be a good investment for you.
[00:01:54] First and most important, you must learn some kind of skill that is an analytical technique.
[00:02:01] It can either be a fundamental analytical technique or like nowadays it's called technical
[00:02:08] analysis.
[00:02:10] You can decide one of the two.
[00:02:12] To begin with, make sure that you focus on one or two aspects of either technique.
[00:02:19] If you're focusing on the technical analysis part then you should focus on trend analysis
[00:02:24] and supports resistances only.
[00:02:28] These will help you determine if a stock is a good stock to invest in and what can be
[00:02:33] potential investment levels or profit booking levels that you need to identify.
[00:02:40] If your focus is on understanding and learning the fundamental analysis technique then you
[00:02:45] will have to learn price to earnings ratio which is simply called as PE ratio which compares
[00:02:52] the stock's current prices to its earning per share.
[00:02:57] In short, a lower PE ratio might suggest the stock is undervalued.
[00:03:03] You can find on different financial websites or stock market applications about PE ratio
[00:03:10] compare it with the industry average and other companies in the same sector to see if that
[00:03:16] particular stock is relatively expensive or cheap to invest in.
[00:03:22] One of my most favorite methods to analyze is dividend analysis.
[00:03:28] Dividend basically means a regular payment to shareholders from the profits that are made
[00:03:35] by the company.
[00:03:37] Consistent and growing dividends often indicate that the company is financially stable.
[00:03:43] So you should look at the dividend yield which is the annual dividend divided by the stock
[00:03:50] price to assess the income potential.
[00:03:54] Let the company's dividend history on financial websites look for a history of regular and
[00:04:01] preferably increasing dividend payouts compare the dividend deal with similar stocks to
[00:04:07] assist if it is competitive.
[00:04:11] Similarly, the second point would be setting clear investment goals.
[00:04:17] Capital management and how and why is an important point.
[00:04:24] Setting out why you are investing with how much that is key.
[00:04:30] Think of investing like a journey where do you want to go?
[00:04:35] Maybe you are saving for a big purchase like a car or a new home or you are thinking about
[00:04:42] the future and want to retire comfortably.
[00:04:46] Setting clear goals helps you plan how you want to have your investing journey.
[00:04:52] Write down what you want to achieve.
[00:04:55] Once you do that, you should also include how much money you want and when you need it.
[00:05:00] So specifying is very important.
[00:05:04] Another point to add to this is you must learn to embrace a long-term perspective as an investor
[00:05:10] in the stock market.
[00:05:12] The point is think big not think quick.
[00:05:18] Picture your investments like a growing tree.
[00:05:21] It takes time but it definitely grows.
[00:05:25] It provides much more than just benefits on a temporary basis.
[00:05:30] Instead of trying to predict when to buy or sell so basically like they say time the
[00:05:35] market you should focus on regularly adding a little money or a little contribution.
[00:05:42] This long-term approach helps your investments grow over time.
[00:05:47] If you can set up a plan to regularly add a small amount of money to your investments.
[00:05:54] It's basically like watering your financial tree regularly.
[00:05:58] Remember that you are an investor and not someone who is in this for a short term.
[00:06:05] Investing in the stock market is something that requires patience, focus, discipline
[00:06:11] and most important you need to not look at the markets as an everyday result.
[00:06:18] Rather focus on the long-term investment returns by looking at the bigger picture of how
[00:06:24] well you can do over the longer time frame.
[00:06:29] Just to give you an example, if you buy an investment property then normally it is for a long
[00:06:36] term.
[00:06:37] So do you keep checking the value of the property every day?
[00:06:41] I don't think so.
[00:06:44] So what you do is you keep a check of how the surrounding is growing, what is the potential
[00:06:50] of the value for your property to go up is that on the cards and that's exactly how
[00:06:59] you behave as an investor analyzing if the potential value of your property has a chance
[00:07:05] of going higher because of surrounding activities and growing locality.
[00:07:12] You need to realize that the value of your investment has to go up over time and not instantly.
[00:07:21] So the everyday market move is not something that you have to monitor.
[00:07:26] However, you have to monitor other factors that could affect your investments which will
[00:07:32] help you change your investment, adjusted investment or simply saying let it be as a
[00:07:38] test so it grows over time.
[00:07:41] In simple terms I would say start by learning the basics of the stock market, set a clear
[00:07:47] goal and what you want to achieve and think of yourself as an investor for the long-term
[00:07:54] rather than a quick race for money.
[00:07:58] This way you can begin your investing adventure with confidence and a plan in place.
[00:08:04] I hope this was a useful episode for all of you.
[00:08:07] Thank you for joining smart money short talks until next time, this is your host Kedha
[00:08:13] not going to signing off.