One of the most common misconceptions about stock investing is that it requires a large sum of money. Such beliefs deprive inexperienced investors of the benefits of starting early and building wealth. They continue to wait on the sidelines until they have saved enough money to invest in stocks. Alternatively, they are hesitant because they are afraid of losing money.
However, as an investor, you can invest in stock markets with as little as Rs 100 and build wealth over time. Here’s what you should bear in mind while investing in the stock market or option trading with less funds.
1) Clarity regarding your financial goals
Why are you investing? While earning returns is an obvious response, what are your plans for the funds? Are you attempting to save for retirement? Or do you plan to buy a property in a few years? Or consider your children’s schooling. You will be able to determine the timescales and types of results you require based on your goals.
2) Learn the Basics
You don’t have to be an expert to understand the basics of stock investing. Using a free trading app for online investments helps you understand the statistics about a company, such as revenue, profit, debt profile, margin, and future growth potential. It also allows you to review the company’s dividend payout history.
Check the stock price performance over the last few years on an online trading platform to see if there has been a consistent growth in prices or if they have been turbulent. This could indicate your future profits from the same.
3) Start Slow and focus on your savings
While saving money is a significant challenge, it is actually a lot easier than you think. All you have to do is start. Make a budget for your monthly spending and include a certain amount that you will save. Even if you can save Rs 200 a month, it will eventually help you invest.
Slow investment is not a sprint. To develop riches, you must first start and stay. If you have Rs.1000 to invest, seek stocks that fit your budget and select the finest possibilities. Slowly but steadily, as your savings increase and your awareness of the market increases, you will have a portfolio of companies that you have handpicked based on your investing profile.
4) Beware of penny stocks.
Penny stocks are shares that are priced very low. Not all penny stocks are terrible. In most situations, these equities are underpriced due to poor demand. This indicates that there are no buyers for these stocks on the market. Such stocks may be priced low due to the company’s financial situation. It might be on the point of collapse.
5) Diversify
Many new investors believe that diversity is only for experienced investors. This is not the case. Investors should diversify their portfolios, invest in shares, nifty 50 etc. and avoid over-exposure to a single sector or market capitalization. If the previous sector continues to struggle owing to macroeconomic factors, their entire investment would be jeopardized.
6) Avoid Emotion-Based Investment Decisions
Most new stock investors lose money because they let their emotions drive their buying and selling decisions. For example, the lockdown-induced market meltdown caused many investors to sell high-quality equities at low prices out of panic. You should ideally base your decisions on facts and statistics when you consider investing in the share market, and you should hold on to high-quality stocks while selling those that are not fundamentally sound.
Your Take
You do not need to worry about investing in stocks when you use a trusted online investment app. Many provide SIPs, which allow you to invest as little as Rs.500 per month in equity funds. This gives you access to the stock market without the burden of investing individually in high-priced stocks. You can also copy the SIP process and set up your own SIP to invest directly in equities.
Remember, there is a lot of stock investment advice on the internet, with celebrity investors sharing their portfolios with the public. Novice investors frequently copy these portfolios, assuming that they will achieve comparable returns on a smaller scale, but this can be very risky. Therefore, stick to the fundamentals and look for the best investment apps & strategies to begin investing with little funds.