How to invest in stocks for beginners with little money?

Stock market has its fair share of ups and downs in history. It has been the game-changer for people who have taken risks and fetched high returns in the long run. There’s a myth that you can invest in stock exchange only if  you have a large capital. However, this isn’t true. As a beginner, you can start with money as low as Rs 500 too. But how,as a beginner do you select stocks to invest in with little money?To help you take the plunge in the world of stock investing, here’s a  small guide on how to invest in stocks for beginners . .

How to buy the best stocks for beginners in India? 

Share market investing can be confusing for a beginner, but if invested in with enough knowledge and information can go a long way in building wealth over time. The earlier you start investing, and the longer you stay invested in strong businesses, the higher the returns you will reap. As a stock market entrant, you can follow the steps that will tell you how to buy the best stocks as a beginner.

Set Investment Goals

Having a well-defined investment goal is essential when you are entering this field with little money. The money is limited, so you need to decide how much risk you can take, how long you can wait for the desired return and how much return do you want out of it. Knowing your risk profile and having an investment objective helps you know your limits and choose the best stock suitable for you.

Get a Demat account and broker

To invest in the stock market, you should get a DEMAT and trading account through a broker. You need to search for a SEBI registered broker who will trade in the stock market as per your instruction. A broker is an individual, company or online agent who is authorized to buy and sell shares of the companies listed in the Stock Exchange. Thanks to digitalization, there are several online websites and apps that serve as brokers and facilitate investing in stocks for beginners.

Find a guide or be your own guide

Investing in stocks for beginners requires a lot of homework to be done. One needs to brush his knowledge about stocks, follow the company updates, go through several financial analysis and then choose the company where he wants to invest. However, it’s always wise to do your own research even if its time consuming, so that you are fully aware of what you are getting into. Therefore its important to choose a good investment platform such as Groww that facilitates hassle free stock investing.

Diversify your investment

When talking about buying the best stocks for beginners, diversifying across companies and sectors is the key to keep your capital safe. Instead of investing all your money to buy shares of a single company, you should divide your investment amount to purchase shares of multiple companies. This diversification reduces the risk of losing all your money, as the fall of the share value of one company can be compensated by the rise of the value of shares of another company you have invested in.

 Play it safe

As a beginner, it will take time to understand the basics of the stock market and get your footing stable.  You should have a realistic approach and should not expect a high return within a short period of time. Reaping wealth from the stock market requires patience and perseverance. For investing in the best stocks for beginners 2020, one can opt for ETF and DRIPs as one can start investing in them with a very low amount. These concepts are explained below to help you buy the best stocks for beginners in India.

Review your stocks daily

Whenever you start investing in the stock market, you should monitor the shares you bought daily. The stock market is known for its high volatility, thus you have to be careful about the ups and downs of your invested money. Moreover, if you’ve wisely invested in a regular dividend-paying company, you should keep a check on the dividend payment frequency.

Concepts one should know before investing in the best stocks for beginner 2020

As a beginner , there are certain options in stock investing, that can help you enter this avenue with minimal risk. Let’s see what they are :-

Concept of DRIP

Dividend Reinvestment Plan, popularly called DRIP, is a great investment plan for those who are starting off with a little money. DRIP is an investment plan in which the dividend that an investor receives is reinvested in the company. This helps one to accumulate a greater number of shares over a long period and thus fetching good returns in the future. It is a low-cost option to accumulate shares without any brokerage fees or commission. DRIP can be said to be the best Stocks for Beginners investing a little money.

Exchange-traded Fund

An Exchange-traded fund (ETF) is a low cost investment option which involves a collection of security and is traded in Stock exchanges. ETF works along with an index which is a mix of assets. When you purchase ETF shares, you own a portion of the portfolio of the entire index. Some stocks that you have invested in the index may do well whereas others may do poorly. In this way, they balance each other out diversifying the risk.  ETF shares can be considered as best shares to buy for beginners in India 2020.

To Sum Up,

It is important to have realistic expectations from stock markets. As a beginner, make sure you do thorough research about the companies you have chosen for investing as well as know about the sector as well. Once you have selected a company on the basis of strong fundamentals, remain invested for a substantial amount of time for your investments to mature and reap results. Most importantly, diversify across industries.

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