How To Start?
How to start Investing?
Most of the Investing activities are facilitated through the stock market, unlike savings which are usually done with banks. The main reason behind this is that stocks generate high returns in comparison to other asset classes. Compared to simple savings in a bank account, the process of investing is little more elaborate, but with the right knowledge, one can easily learn how to invest in the stock market.Investing for a novice should essentially begin with the identification of his/her short, medium and long-term goals. It is very crucial to understand how much risk an individual can take. Risk is essentially the amount of money one can afford to lose, if an investment ends up making losses. It is also known as an investor’s risk appetite.As per their risk appetite, beginners need to conduct an analysis of what kind of financial products suit both their goals as well as the risk appetite.
Getting back to stocks, they can do this with the help of two broad analysis techniques –
1. Fundamental Analysis: The process of analysing the financial status of a company and the industry in which it is operating to make an investing or trading decision.
2. Technical Analysis: The process of analysing charts with the help of patterns and indicators, to identify possible price trends in the future.
Beginners can choose either one of these, or a combination of both these techniques, to filter out the best potential investments from the stock market. However, it is always preferred to use a combination of both Fundamental and Technical analysis to get the high probability return generating investment ideas. Apart from this, there are some other concerns that need to be addressed while investing. We will discuss them in the next unit.