Investing in the stock market, do you have to keep investing in the stock market in 2023, How much should I invest?, Types of investments in stock market, When should I invest?, Which platform is best for investment?
You must have heard from others that investing in the stock market is a difficult task because an ordinary person cannot access which stock is good or bad. It is true that you should have basic knowledge of finance and you should assess your risk-taking capability.
The answer to the topic of discussion is: Yes, you have to keep investing in the stock market. There are several reasons for investing in the stock market. One of the key reasons is a good return on investment. There are certain stocks that have given more than 100% return on investment within a few years.
For example, the price of Tata Power during covid was near Rs 50 and in April 2022 the highest price touched was Rs 297.
None of the FDs or government schemes can give you this much return on investment.
You do not have to be a super genius or master of the stock market to invest in stocks. Just follow a simple strategy that will give you a minimum 6 to 7% return on investment within a few months. Click the link below to know the investment strategy
Once you have decided to invest in the stock market, the next question that you must be thinking about is how much should you invest.
How much should I invest in the stock market?
Well! the answer to this question is 20% of your monthly or yearly income. However, there is no rule of thumb for the amount of investment in the stock market because it entirely depends on you. An average investment should be 20% of your income which you can increase or decrease depending on your risk-taking capability.
The reason why I have stated 20% for investment in the stock market is that the risk is also high. Always remember when the return is high, the risk is also high.
A golden rule of investment says never to keep all your eggs in one basket. This means you should diversify your savings in multiple investment avenues. For example, 20% in the stock market, 20% in FDs, 10% in government bonds or gold bonds, etc.
You can also start with a systematic investment plan (SIP), where you can fix a monthly investment of Rs 500 or 1000 or more. In this way, you will be able to beat market ups and downs.
Types of investments in the stock market
There are several types of investments you can do in the stock market, like equity, options and futures, commodities, mutual funds, currencies, IPOs, etc. But in this article, I will discuss a few of my favorite types of investments in the stock market which are less risky compared to other investment options.
Equity or stocks or shares is an entitlement of ownership in the company. Even if you buy one share of a company, then also you are entitled to be part of an organization. For every stock, you get certain rights like dividends. A dividend means the part of the profit shared by the company with the shareholders. If the company declares are dividend of Rs 5 and you have purchased 100 shares, then you are entitled to get a dividend of Rs 500.
This is an additional return on investment which you get a part from the capital appreciation. Sometimes, the companies declare dividends more than once a year. ITC declared a dividend of Rs 11.5, GAIL declared a dividend of Rs 10, Hindustan Zinc declared Rs 18 in 2022, and many more.
2. Mutual funds
Mutual funds means the pool of funds by several investors and the fund manager allocates the funds to multiple companies based on the previous profitability of the company. The entire fund is managed by the fund manager and he can access when to buy or sell the stocks. The investment concept is similar to equity, but experts manage the funds here.
For example, a group of 100 people contributed Rs 5,000 each. This will make a total of Rs 5,00,000, which is then invested in stocks belonging to multiple sectors.
Mutual funds are the best mode of investment when you cannot track the market’s ups and downs regularly.
Mutual funds have given more than 80% of return on investment in the past 3 years especially those who have invested during the covid period.
Gold or digital gold is similar to equity but it moves in the opposite direction. When the Sensex increases then the gold price decreases and vice versa. It is not advised to purchase physical gold due to taxes and charges levied by the jeweler.
Investment in digital gold can start with a minimum of Rs 10. You can buy and sell gold online, and you do need not to visit the jeweler.
When should I invest?
The best time to invest in the stock market is when the market corrects by at least 10% or the gold price decreases. Investment in this time frame will help you to get quick returns on investment.
One of the examples of a market correction is the covered period when the Sensex plunged from more than 42,000 to less than 27,000.
For a new investor, the best time to start investing is today or as early as possible.
You must have heard about the power of compounding, which works very well if you start investing in your early 20s.
Which platform is best for investment?
Till now we have discussed everything about investment in the stock market, like how much to invest, types of investments, and when should I invest. Now you must be thinking about where you should go to get your Demat account.
Almost every Bank provides a Demat facility but they charge annual charges, depository charges, investment charges, etc. The best option for you to start your stock investment journey is discount brokerage firms like Upstox, Zerodha, etc.
Investment in the stock market is not a quick rich scheme. You have to keep your money invested for at least 5 years if you want to earn a huge return on investment.
Disclaimer: If you want to invest in the stock market, you should consult your financial advisor before making a buying decision. You should assess the risk and study the company details.
Frequently asked questions
- How long you should stay invested in stocks?
At least 1 to 5 years
2. At what age should you get out of the stock market?
Around 70 years
3. How much money should I have in stocks?
Around 20% to 30%
4. Where should a beginner invest?
Mutual funds, equity and gold
Follow for more updates
Follow Raveen Chawla on Medium