Beginners Guide To Stock Market Investing – Forbes Advisor INDIA – Forbes

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Stock market investing is a long-term process that could help you manage your finances. Investing in the stock market can seem daunting, especially when you are just starting, as it may appear too complex or risky. A careful understanding can help you get started.
Among the two top reasons to invest in the stock market are the possibility of getting higher returns to your investment and to develop financial discipline. For instance, when compared with basic saving instruments such as fixed deposits, investing in stocks has resulted in a higher rate of return in the last decade. Periodic investments inculcate a habit of financial discipline, encouraging you to save money and invest it carefully.
Here’s a brief guide to help you through the process of stock market investing.
In simple terms, a stock market is a marketplace where financial instruments are traded — these can be stocks, bonds, commodities, among others.
The two primary stock markets in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The NSE is by far the largest, with over 90% of cash trades. There are also other exchanges for commodities like the Multi Commodity Exchange (MCX) and the Indian Energy Exchange (IEX) for power trading and so on.
All activities as well as participants of the stock markets including day-to-day trades, instruments being traded, exchanges that enable the financial instruments to be traded, are regulated by the Securities and Exchange Board of India (SEBI).
Apart from listing companies, these exchanges also manage indices. An index is a basket of stocks that represents a theme, be it size or industry. It also allows investors a common gauge on the trend in the stock market.
The most common indices in India are the NIFTY and SENSEX. NIFTY is a basket of top 50 stocks by market capitalization listed on the NSE. The SENSEX is a similar index of 30 companies listed on the BSE.
The stock market indices are commonly used to benchmark the performance of fund managers and other stocks. For instance if a mutual fund that benchmarks its performance to the NIFTY did 15% returns this year and the NIFTY did 20%, the mutual fund actually “underperformed” its benchmark. This means you would have been better off just buying those 50 NIFTY stocks instead of relying on the fund managers’ expertise.
You cannot buy or sell directly on the stock market. For this, you have to go through brokers who are authorised to trade on the market or stock brokerage companies that allow you to trade using their platform. The process is simple:
There are a few types of charges that you will usually pay:
The key financial instruments traded on the stock market are:
When researching stocks or MFs, you will come across the term “market cap”. Market cap or market capitalization is the value of 100% of the company. Put simply, if say a company’s market cap is INR 10,000 crore, it means that is how much money it would cost you to buy all the shares of the company.
Based on the market capitalization, three types of stocks categorisation exists. It is important to know this because many mutual funds and ETFs are classified based on the market caps they focus on.
Apart from market cap, stocks are categorized by the industry, how much dividend they pay, how quickly they are growing, among others. 
Anyone can invest in the stock market. It is a life skill that needs to be honed and like all good things, it needs a little patience, time and study. With thoughtful investment, you can make your money work for you and achieve your goals and dreams.
Kanika Agarrwal is the co-founder of Upside AI, a fintech start-up focused on using machine learning for the investment sector. Kanika is a Chartered Accountant, a CFA charter holder and a commerce graduate from Mumbai University. She has over 11 years of experience in finance and investing.
Aashika is the India Editor for Forbes Advisor. Her 13-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.

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