5 Things For A New Stock Market Investor

There are a handful of things you must know before you dive into the stock market. You can save yourself a lot of time, effort and money if you follow the advice in this article.

1. Get trading and demat accounts

You will need a stock-trading account and a demat account to start investing in the stock market directly. There are many brokerage firms, and you can choose among them. One of the easiest things you can do is contact your bank. Most banks provide brokerage and demat services. Since you would already have an established relationship history with your bank, you would feel more comfortable.

2. Opt for an online trading account

You can place your stock-purchase orders over the phone or online. An online trading account brings a lot of transparency into your transactions. With an online account not only can you place orders yourself, you can also track what is happening to your order in real time. Also, never let the broker or anyone else trade on your behalf. You should be the only one who has access to your stock-trading account.

3. Be cautious of broker's advice

The moment your stock-trading account is opened, the broker would like you to opt for many services it offers, including regular stock tips and guidance. What you must appreciate is that your interests are always secondary to the broker. He has his interests in mind, which are related to your trading frequency. So, he would want you to trade more. Nassim Nicholas Taleb eloquently quoted, 'Never take advice from anyone in a tie. They'll bankrupt you. Don't ask a general for advice on war, and don't ask a broker for advice on money.' Never feel compelled to buy and sell as per your broker's advice. Rely on your judgment, analysis and research.

4. Keep records

Your broker should send you a contract note for every trade you make. You should verify it and archive it. It is the proof of the transaction. Also, you should make a note of your buying prices and dates, selling prices and dates, profits and losses, quantities bought and sold, etc., in an Excel sheet. This will not only help you track your investment results and pay taxes but will also bring discipline to your investing approach.

5. Start small

Start investing with a small amount of money. Since you would be learning during your initial phase in the stock market, its better that you commit smaller sums of money. Even if you have a large corpus to invest, go slow. Once you have gathered ample experience and are confident of your ability to invest successfully, you can increase the allocation.