How to Start Investing in Stock Market?

I am writing this post with the prospective of beginner who want to start investing in stock market. 

There are a number of newbies who want to learn stock market but do not know where to begin. It’s really simple and hassle-free to research a good stock and to invest if you follow the following steps.

How to Start Investing in Stock Market? 

Here are the few guidelines which can help you to start your journey in the stock market and learn how to start investing in stock market for beginners.

1. Invest in what you know:

   There are a number of multi-bagger companies that you know so well but might not have investigated. You come across a number of these companies from morning till going back to bed in night. For example, the toothpaste you use (COLGATE), the hair shampoo you apply- Dove (Hindustan Uniliver Ltd), the underwear you use (PAGE INDUSTRIES), the motorbike you use- Bullet (ROYAL ENFIELD), the bank you use (HDFC BANK), the petrol pump you daily visit (HPCL) and ……. Start looking around. You can find hundreds of companies that you already have a good idea about.

2. Study the company’s financial:

   Once you have got the name of a company you are interested in, then start looking at its financials. There are a number of financial websites where you can study the annual reports of the company. For example- Screener[dot]in, MoneyControl etc. Read more here: Learn how to follow Stock Market and trends.

3. Evaluate the stock:

   There are a number of ways you can find whether the stock is under-priced or over priced. The easiest way is to use various financial ratios ratios like PE, P/BV, EPS, etc.
   Here are few financial ratios that you should notice:
   Earnings Per Share (EPS) – Increasing for last 5 years
   Price to Earnings Ratio (P/E) – Low compared to companies in same industry
   Price to Book Ratio (P/B) – Low compared companies in same industry
   Debt to Equity Ratio – Should be less than 1
   Return on Equity (ROE) – Should be greater than 20%
   Price to Sales Ratio (P/S) – Smaller ratio (less than 1) is preferred
   Current Ratio – Should be greater than 1
   Dividend Yield – Increasing for the last 5 years

Apart, you have to also look into the annual report to study the growth in sales, profits etc. Besides, there are few other things also that you need to research carefully about the company like its management, debt, liquidity, competitors etc. You can read more in details here: How to select a stock to invest in Indian stock market for consistent returns?

I hope the post is useful to the readers. If you have any doubts or need any advice, feel free to comment below. #HappyInvesting.