DIY guide to starting investment in Stock Market!!


Everyones interest in stock market seems to be picking up.  Stock market is a very risky tool but sensible investments can lead to huge gains in short and long run.  I have decided to now break up steps to begin your first venture in stock market. I am presuming that you have your Demat account now in place, have kept aside Rs 20000 for investment and are waiting to start the race for stock market gains.

First step is to get into the habit of logging into your Demat account atleast once a day, preferably at 9:30 am. The markets work from 9am to 4 pm on weekdays. Opening your Demat account online and tracking your investment gives you a key insight on your investment. Most companies do not block your bank account portals and Demat portals when at office. Open the portal up first thing you reach office and look at your investment. Trust me, it will turn out to be more rewarding than following your facebook timeline. One Advice to follow is not to panic with market fluctuations. Most retail investors start panicking when rates of a stock fluctuate every minute.
From the first step comes the holy rule- Always follow the investment target. Investment target is broken up into four components CMP- current market price, SL- Stop Loss , Tgt- Target and period. CMP determines the rate at which a stock tip is recommended for purchase. Your broker or investment guide recommends a purchase at a specific CMP. This CMP should be your guide to buy in into an investment opportunity. CMP will also determine how good the tip is. Whenever a buy is recommended by your broker at a specific CMP check the following deligently
  1.  What has been the 52 week high and low for the stock?
  2.  Has the stock steadily risen in past three years?
  3.  Does the company have stable Debt equity ratio and P/E ratio?
  4.    Has it regularly declared dividends
If the answer to all the above is a yes then you should move on to analyzing the TGT or target. No share can fluctuate more than 20% high or low than previous days closing price. This is called upper or lower circuit. This is a mechanism inbuilt in the stock market to protect the investors. Any share that hits upper or lower circuit, the trading for the same in the stock market is suspended. Tgt also helps you determine whether the investment you are making meets your objective. Always target a 15% rise minimum. After deducting brokerage and taxes you end up earning a minimum of 12%. This, if you churn well, can turn out to give you a 60% p.a return. This is not theoretical. Many people mobilise their investment like this.


Stop Loss is the “jumping out of the car” point. You know when the brakes are failing and you have either a choice to keep going in the car hoping they will start working or jumping out of the car accepting the fact that you will sustain minor injuries but have your life with you. Stop loss is that point. No matter what, whenever a stock hits Stop loss level or the level at which your broker has recommended an exit you have to sell it off. This is to ensure that your principal investment does not erode beyond a point. Most common mistake with stock market investments is investors ignore the stop loss trigger and try to hold a stock as a long term investment. This is a sure shot way of losing your hard earned money
Period must always be looked at in an investment opportunity. If the stock continues at CMP but does not reach SL or TGT and period is over again the investor should sell immediately. Churning the money will generate profits.
Step 2 is simple. Determine your method of investing. I recommend to first time investors to never trade in Intraday trade. Intraday trade is when you do not take delivery of a share and trade only in difference in prices of the share in that single day. Leave the intraday for professionals and gamblers. Always target delivery based trading. It may cost you more in terms of brokerage and transaction cost but it is also safer. Long term investment for a year or more is for investors with very small risk appetite.
Step 3 is always withdraw your gains every year or even a portion of it. Don’t keep reinvesting your profit beyond a point. This is primarily for two reasons, one is to enjoy the gains you have made rather than keeping it in electronic form and second securing your principal investment by constant and regular payouts.
These are a few tips and tricks to start investing in Stock Market. I believe anyone can make money in Stock market by being disciplined and having a balanced approach.
Keep Investing.

I would love to hear your thoughts in the comments section or you can reach me at saransh.s.dey@gmail.com

-article by Saransh Dey
FCA, LL.B, B.Com, MBA- IIMK

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