Start with paper trading

First step any new investors has to take is to build their knowledge and ability to identify good, bad and great investment opportunities. However, stepping straight into the market after learning theory and trying to validate your investment ideas would be expensive. It would benefit for starters to practice investing without the risk of losing money and also to validate their models of investing with paper trading where real money is not involved. You take a piece of paper put down the amount of capital you would like to invest often the same as much as you are ready to use while trading and list out stocks and their current prices on that day. You then trade them like you do in real life and reduce any brokerage and other costs involved. This practice would be beneficial to validate your investment methods and also with no risk of losing money. It also builds patience and discipline which would be beneficial when you start trading in the stock market.

Sort out capital

This is one of the most vital factors to determine your success or failure and also for your mental well being during the course of your investment. Repeatedly it is evident that people source their capital by lending it from someone close, either family or friend or from a credit card which ends up incurring huge interest over time and also ruins credibility in case of failure to pay on time. Do not lend to invest in the hope of doubling or tripling of investment and pay back with good profits left for yourselves.

Always have some buffer for emergencies before investing. Do not listen to gossip and put all your life savings in a single stock no one ever heard of. Do not hope that money will magically double or triple in no time. It takes time and patience.

Choosing online brokers and understand the costs

Gone are the days when people would physically go to a stock broker to place orders. With the advent of online brokerages paying in, trading and cashing out has become super easy and fast with plenty of resources on their platforms to learn about investing. Zerodha and Groww seem to be the platforms of choice for most in online brokerage as they have better overall user experience with a huge community support through their vast user base.

Stay away from intra day trading

Especially if you are a starter to investment. Do not do intra day trading. It is too risky and people often fail to see the downside of losing multiple times of your actual investment. It is stressful and often involves dedicating your time of the day towards inspecting trends and is not overall profitable in the long run. SEBI has released a report that over 95 percent of the day traders actually lose money either through bad decisions or by incurring huge transaction fees.

Understand compounding

This is what differentiates regular to great investors. Investing 100000 at a 20 percent annual return for 30 years grows to roughly 2.37 crore, illustrating how compounding turns steady returns into massive wealth over time by earning returns on both the original investment and accumulated gains. All it needs is patience and discipline from the investor. Continuous good decisions can result in massive wealth.

Small consistent actions over time create disproportionately large results

Know the business in and out

Some businesses align themselves better than others in any market through focus on gaining brand loyalty from customers or through offering the best in that industry. Always have an eye out for these companies. Apart from the usual great profits, margins and customer loyalty, analyse the people running the operations and their background and previous achievements.

Here are a few factors that can influence a stock price greatly and should be monitored

Inside the organisation

1. People running the operations such as CEO, CFO and CTO
2. Does the company invest in their staff and improve overall output
3. Is the record of the founders and management clean with no previous mismanagement
4. Does the company have any government affiliation such as contracts, political relationships and deals

Outside the organisation

1. What do customers think of the company
2. Do they stick with the company long term
3. Are there any alternatives to the company that are better
4. World market and industry outlook in the future

Build market discipline

Good discipline and consistency are the greatest qualities one can have in any field especially in the stock market. Investing can be turbulent especially with current world events and disruptions in the market through AI. There are ups and downs and one has to stay focused on their initial goals and not give in to gossip, news and other manipulative reports. Make a decision, analyse and stay invested for the long term. The market always rewards individuals who can do this.

Plan your taxes

In India, your profits from investments are taxed differently based on whether it is long term or short term. Long term typically means holding for more than a year in the case of stocks, while short term is less than a year. Although one can file their own tax return through the government portal with all documents, it is best to consult with a chartered accountant who can do that on your behalf.