How to invest in the stock market? A guide to investing for new investors
3 min read 20 Mar 2023, 11:02 PM ISTOne should always take care of every penny one has invested, so try to figure out what was the price at which large volumes emerged.
PremiumTo make trading takes place via platforms known as stock exchanges, here's how new investors or beginners can invest in the stock market.
Investment and trading: Difference and Benefits
Assume you have all the money that you need to fulfil your current ambitions. When you find a business that will be address a larger issue, you want to be a member of that organization. When you think in this way, you will resist the emotion of greed and instead work to comprehend the business strategy because, you now want the issue to be resolved.
To begin with, let's understand what the management will do and what their goals are for the business.
We always start our research reports with this section because we want our investors to fully understand the firm before making an investment.
One should always take care of every penny one has invested, so try to figure out what was the price at which large volumes emerged. This pushes you to think rationally because someone who has taken a big position, must have examined the business's finances. If the cost has increased since this volume, it indicates that many more people are participating in this journey. In this manner, we were able to identify the stock that experienced investors were interested in for the long term. Trading is being done here.
Understanding the Fear:
Participants in the market and the market are both emotional. When the market reaches a swing high, investors fear losing the profit and new investors rush to join so that they do not lose the rally. Transactions result from this worry of missing out.
New investors are like butterflies. They have a very small share in buying and that too because of emotions. So there will be a considerable amount of selling by long-term investors and this leads them to a new trigger that is News flow.
Role of News: This trigger comes into play because new investors are browsing content and only a few dig deep. But a lot of people want to ask why the market fell. Market emotions get triggered and long term investors have no hurry to participate in buying because they know they have booked partial profits and they also know the price where they can average their positions.
Understanding The Data Published On NSE Website
Investment is similar to nurturing flowers on a plant and designing a garden based on its cycle.
Although this cannot be timed, but by carefully observing the sectors, we can get some ideas where smart money is shifting.
As a research analyst and smallcase manager, we constantly provide the general public with analyses of FII/FPI and DII data. This helps investors follow their investments by performing sector rotation.
Focus on Leaders:
Though we firmly believe that leading stocks in sectors are typically overvalued, we cannot ignore the attraction of including leaders in the observations. This also enables us to follow news and the perspectives of important managers of leading organizations.
For instance, an IT company reported positive results. We try to gather information from the management regarding what goals and preparations led them to this outcome and if other companies are posing a threat with rising earning ratios.
Earnings ratios:
Investors cannot move forward until they calculate what the investment is going to generate and how much market participants are willing to pay as market price for earnings per share. Businesses generate profits for their shareholders, and the earnings per share are calculated by dividing these profits by total revenues. Now, a wise investor concentrates on the quarterly change in EPS to understand the story.
Author: Gaurav Sharma, Smallcase manager and founder at GauravSir
