Stock Market Basis for Beginners | Common Question’s Answers

It’s said, “If the base is good, then the building will be well made“.

So I have come here today with this post and I will make your stock market base strong so that you will make so much money, and build your own buildings.

In this post, I will clear all stock market basics.

Beginners get scared by just hearing share markets’ names. In films, we see the share market destroy everything but friends are claiming that they are making lots of money.

Besides that family members says to stay away from it.

Above that, if you had studied commerce in school or college still there it’s not exactly told correctly about the share market.

In that case, it’s normal to have confusion and nervousness. But after this post, all of your confusion will be cleared and you will find out how and where to enter.

Also, Read…

1. Best Finance Movies
2. Top Crypto to Invest
3. FaucetPay to Paytm
4. Money Saving Tips
5. Earn Higher Interest with Auto Sweep

Common Questions

Is the share market risky?

Basically, when you buy a share you buy a somewhat small part of that company.

That’s why it’s called share, and you are becoming a co-owner of it.

So now you tell me if you invest in a friend’s business or relative and if that business doesn’t do well then your money will drown, that’s a risk.

Just like that in the share market, you are investing in big companies like TATA, Reliance, and Godrej.

And if the company drowns, then your money will also drown.

If the company shows very good growth, then your money will also grow.

It’s just like you invest in your family member or friend’s business with this hope, if the business grows, I will get a part of the profit, and if it losses then I will take the loss, and won’t have to give any interest.

In the share market, you don’t get any interest, because it’s not a loan.

So there are many companies that drown and make a loss.

But look at Eicher Motors in the past 7-8 years, they have increased the sale of Bullet bikes many times.

Like that many times, more shares have grown which means Rs-1 has grown 10x-20x times.

There are many shares like this, I’ve given the example of WIPRO, TVS is an example which has grown 10x times in 10 years,

MRF is also an example, there are many more shares like this that give you 10x times return in 5-6 years.

Definitely, it’s risky and that’s why the returns are high.

How much return will I get?

let’s take the same example if you invest in a friend’s business so who knows if you invest Rs-10, in the next year you’ll get 10% profit or 20% profit or 30% profit, it differs a lot and cannot be fixed criteria.

For this, there are many shares in the market that don’t grow a single rupee, instead, fall and some grow 4x to 5x times in a single year.

But it’s just about one share when you’ll enter it will not just be one or two shares you’ll invest in a portfolio of stocks, like at least 8-10 companies.

Because if 1-2 companies come out bad or drown. Still, you don’t overall lose all of your money.

That’s why in the share market we invest in at least 8-10 companies.

so when you get a basket of stocks, you can believe that if you have invested correctly so 18% to 20% return in India’s high growth economy in the long run, which is at least 5 years if you had invested and you picked good stocks then you’ll definitely get around 18% to 20% in return.

This means compared to FDs, which are trending now 3x times more, and 2x times more compare to Gold and Real estate.

In fact, there are many successful investors in the world who are in low-growth economies than India where the market and companies are slowly growing.

there they picked such stocks, where they get around 30% return for many years.

So in India, if you are expecting 20% return then it’s now wrong.

But your stock picking should be good. How to find such shares that will grow and bring growth to your money.

How much money is enough to start?

See despite the amount of money you are investing in the stock market it’s more important which type of shares are you investing in and how consistently they give return.

I give you an example, if you start with Rs-1000 per month [which many of us can afford starting with], we have to invest Rs-1000 monthly in the share market.

And every year increase this Rs-1000 by 15%, which means first year you’ll invest Rs-1000 every month Rs-12,000 a year.

From the next year increase that by 15% which means you’ll invest Rs-1150 a month. 

And like that every year, as your income grows you go from student life to an earning member or if you get a promotion and your salary gets increased.

So if you do that, starting with Rs-1000 and every year 15% increment and you are getting only 15% return on your investment, not 18% or 20%.

Despite that, starting with Rs-1000, after 25 years you will have Rs-1 crore.

The key is…

1. you have to invest for 25 years
2. you have to increase the amount by 15%, 
3. and you have to get 15% return.

If these three things happen, after 25 years starting from Rs-1000, you will have Rs-1 crore.

How difficult or easy it is to start?

If I want to enter then what’s the process?

The process is very simple you only need three documents.

1. Aadhar Card
2. PAN Card
3. and Bank Account

If you don’t have a bank account then open one.

Nowadays all the process is online. There are many online discount brokers [a discount broker is because they take almost zero brokerage.]

So you don’t need to do anything there are many online discount brokers, like Zerodha.

In 3-4 days, without any physical paperwork, your account will be opened online and you can start trading.

The account opens is Rs-300 and brokerage or commission is zero to none. [if you are investing.]

So if you are buying and keeping shares and selling them after two, three days, or more then you don’t have to give any commissions.

It’s almost free. Some little government taxes are there which you will don’t even know, because that’s less than 0.1%.

So I personally use Zerodha because it’s very simple to use and very easy for beginners.

Now move to the next question.

if everything is so good then why share market’s name is so bad?

Why do people fear it?

Can I tell you a simple reason, this is a mindset problem.

When we buy a property, does anyone thinks in 4 days the price will be doubled and I will sell it out.

When someone buys Gold, they pass it on for generations but never sell it.

No one thinks that, let’s buy today then after one month when the price increases I will sell it.

So we give property the time to increase

we give gold the time to increase.

But if your friends say you to come to the share market and they will say this too that they made Rs-50,000 in one day, doubled their money in 4 months.

This means their expectations are wrong they come here thinking that, the new people who come that I just have to become rich overnight.

You can either become rich overnight by lottery or if you gamble somewhere and if you are lucky then it can happen. 

So if you play the share market as a gamble.

For the company that you are becoming an owner and buying share of, about that who is the manager? What is their business model? 

Not finding out about that, and just read a chart and heard from someone and bought the shares.

Then you will obviously make a loss.

So like that, in the rush of making money people buy Rs-1, Rs-2 penny stocks and there is no front and back of that company.

Thinking of that if 1 becomes 2 then money doubles.

But that 1 to 2 never happens, because the company is not worth it.

So the most important this is, when you are coming into this market don’t think this market will make you rich overnight.

Like I said, return between 18% to 20% should be expected, if more then it’s a bonus.

This means if you get 18% to 20% return then your money will be doubled every 4 years.

If we compare it to Bank FD then in Bank FDs, it takes 11-12 years to double the money according to today’s interest rates.

So compare to that, this market offers 3x times more.

Which is enough.

Don’t be greedier than this.