6 Things to Do Before you Start Investing in Stock Market

Made up your mind to invest in the stock market but can’t get yourself to take the plunge? Go through the following checklist to be assured that you are heading in the right direction and are ready for the stock market.

1. Understand what you are investing in

It’s really important to understand what exactly the stock market is and what it means when one invests in equity. Equity is share issued by companies that gives the shareholder ownership rights in that company. Thus, the investor should understand that the growth and the working of the company are two essential things to look out for while making investment decisions.

2. Have clarity about your investment goals

One basic question that any broker is likely to ask you is about your investment goal. This would require you to think about various aspects related to equity investment. First, you must decide between being a short term investor and a long term investor. Once that decision has been made, you should have a rough idea about the expected returns. The risk and return parameters go hand-in-hand, and thus both your risk appetite and return expectations need to be taken into consideration.

3. Find out about the brokerage and commission of brokers

Any person can tell you that for trading in the stock exchange, all you need is to open a Demat account and find a good online broker. Different brokers charge different brokerage fees and commissions for the services they offer and having a good knowledge of the same lets you estimate the expenses that you might bear for trading.

4. Study market timings and trading days

Be well versed with the basics like opening and closing time of the markets, and the trading days and off days of the stock market. These details are all the more crucial if you are planning to place buy and sell calls on your own.

5. Gain knowledge about online stock trading

Knowledge is key in every field, and so having an overview of the working and terminology of the stock market is great before starting actual trading. You can read a few books on trading or go through articles available online. You may watch online videos that will give you an idea about stock trading. This is useful as it will help you to comprehend the news, charts, and trends related to the stocks in a better manner.

6. Start tracking the stocks that you want on your portfolio

Before starting with online stock trading, make a list of potential stocks to create a portfolio and start tracking these to understand the stock movement and trends better. Paper trading is a great way to keep track of the real stock movements and indulge in real market actions like buying and selling the stocks without really having to invest any money. It is like a mock run before you start playing the online trading game.

All these steps can help you be better prepared to enter the stock market. They will make you feel more confident as an investor about the decisions that are to be made.