If you are a novice to Stock market investment, the answer to the query “how to invest in Stock Market with little money?” will be of interest to you.
You must have come across news in the print media or watched a panel discussion on the TV Channels discussing the seemingly intriguing topic about how to invest money in stocks and must have wondered, is it possible to enter the stock market with a paltry sum of maybe INR 100 or 200? The myth about Share Market Investment, among many prospective investors, is that you need to have a large corpus to be kept aside for gainful investment. Standard & Poor and Bombay Stock Exchange’s Sensitivity Index, S&P BSE Sensex in short, are words often synonymous with the games the rich indulge in.
Here, we will discuss this very topic and try to answer your ever bogging query of how to start investing in stocks with little money? This article also will describe the best ways to start investing with little money. For more on how to invest money in stocks, read on.
- 1 Points To Consider Before Investing In Stocks in the Stock Market:
- 1.1 Assess Your Profile as an Investor
- 1.2 Understand the Risk of Investing In Stock Market
- 1.3 Once You Have Assessed Your Risk-Taking Ability Decide On the Timeline of Investment
- 1.4 Acquaint Yourself with the Basics in Stock Market Investment
- 1.5 The Key Is To Save Regularly a Small Amount
- 1.6 Avoid Penny Stocks
- 1.7 Reinvest Profits Cautiously
- 1.8 A word of Caution
Points To Consider Before Investing In Stocks in the Stock Market:
Assess Your Profile as an Investor
What Financial Goals you would like to achieve?
Your decision to invest is propelled by your desire to meet a particular financial goal fixed and targeted by you. The duration of investment, the surplus amount available as an investment fund and the targeted wealth generation to meet the financial goal will play a pivotal role in your entry into the Stock Market.
Thus whether it’s about being able to purchase a used car, if not a brand new one, or invest in a house, or for that matter make provision for your daughter’s marriage, will decide how much investment you need to make.
If you are still reading this article there are chances that the question “how to start investing in stocks with little money?” may still be bogging you. Well, we are here to explain how.
Understand the Risk of Investing In Stock Market
To learnhow to invest in Stock Market with little money, you should understand and appreciate that any investment that has the possibility of providing a high return also has a higher risk as an accompaniment. Therefore you must first assess your risk-taking ability. This will decide whether you grade yourself in any one of the following brackets:
- Low risk
- Medium-low risk
- Medium risk
- Medium-high risk
- High risk
Once You Have Assessed Your Risk-Taking Ability Decide On the Timeline of Investment
Generally, an investment tenure ranging from 6 to 10 years tends to give a reasonable return but depending on your goal you must decide on the stock that you will invest in and the period for which you will keep your amount invested. Long term, small amounts of investment, over a spread out period, in the selected stock averages out the per-share price to increase the chances of booking profit.
Acquaint Yourself with the Basics in Stock Market Investment
As a novice also, you must be able to understand the difference between investments through the primary stock market by applying for shares through the Initial Public Offerings, IPO, launched by companies offering the company’s stock in the primary market. The face value of these stocks is announced beforehand by the company.
After the shares are floated and bought by individuals and other institutions, these shares are then traded in the secondary market, i.e., the share market where the said company is listed may be the BSE. Here the value of the shares may increase or decrease depending on a lot of factors. The general volume of the said stock being traded daily, the buyback options offered by the said company of its shares at a premium, the general trend of the industry segment in which the company operates in, or the overall psychology of the investors in the secondary market, or maybe a Govt. Policy announcement providing a financial incentive to that particular industry segment, all this will determine the performance of the stock to a great extent.
The Key Is To Save Regularly a Small Amount
While you have taken a wise decision to invest in the Stock Market you need to start doing it regularly, even if it is a very small amount, keep aside the paltry amount every month and watch out for any indications of the stock value dipping. Invest wisely in stocks of the companies after thorough research.
Also, read The Basics about Evaluating a Stock in India
As your understanding of the stock market develops you will start making a wiser investment to realize your financial goal.
Avoid Penny Stocks
Most companies, except large renowned companies, offering shares at a face value of INR 10/- are companies not performing well financially and it does not meet its target of subscription. Try and avoid being tempted to invest in these types of so-called Penny Stocks, since you have limited resources and cannot risk losing money.
Reinvest Profits Cautiously
When you have booked profit from selling shares exercise caution while reinvesting that amount. Decide on the correct timing when you should invest, since the timing of your investment in the stock market is vital. Invest in a falling market, but be careful of the falling sharp knife that might inflict a cut. Investment in the stock market requires strategic investment for making entry and exiting the market. Spread out this amount to invest over a timeline to reduce loss and achieve the target.
A word of Caution
However little you intend to invest in the stock market, at the end of the day it’s your hard-earned money so exercise substantial rationale in your thought and avoid impulsive investment. How to start investing in stock market with information and little moneyshould be your surviving mantra in the stock market.