How to learn about investments in the share market

It’s not a secret that investing in shares is a popular activity. Simply keep in mind that the shares of Google (now Alphabet) grew in price 60 times within 17 years: from ~$50 on 8/19/2004 to $2,996.77 on 11/18/2021, according to Yahoo Finance. Some people consider investing to be a matter of luck, but it’s a serious activity. And like any activity, it requires training.

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Where to start if you don’t know stocks

As in any business, you first need to learn the basic concepts of the stock market. It will help you to understand special literature for investors. 

After that, you can proceed to study the factors that affect the stock market. For example, to invest in agricultural stocks, you need to learn about the food market and transport logistics. Shares of resort companies usually rise in summer, while shares of gas suppliers rise in winter. Then, turn to history and see how certain events affect the value of shares. 

During economic crises, the whole stock market fails. However, food and communal companies perform relatively well.

Invest in companies that are interesting to you

Start investing in stocks with those companies that operate in a sector of the economy that is close to you. It is even better if you are familiar with companies that operate in this industry. Learn to understand company reports: are their sales and profits growing? How big are their debts to creditors? How strong are the positions of their competitors in the same sector? 

Make a list of the goods you love, the clothes you wear, and the devices you use. As a rule, high-quality products bring good profits to their manufacturers. Shares of such companies usually grow in price, and they may pay good dividends. 

What are short- and long-term trading strategies?

Risk: what it means in trading, how to measure and manage it

It is more attractive for some investors to get returns from short-term price fluctuations. Such an investment is usually called intraday trading. This name is due to the fact that deals are made within the same day. 

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If you choose intraday trading, your shares will not be transferred to a demat account. This account digitally stores the shares bought by the investor. Ever since all shares became dematerialized into non-documentary digital form, the demat account has become necessary for making deals with shares. 

Intraday trading typically concerns such instruments as futures for which a trading account is sufficient without a demat account. However, creating a demat account may be useful later on. This will not require additional costs. Many financial institutions let you open a demat account alongside your trading account.

The investor has to pay commissions for opening trades. If deals are infrequent, it doesn’t matter. But in the case of intraday trading, the total value of commission expenses increases many times. For a successful trader, this moment isn’t an issue because high-frequency trading is potentially much more profitable than long-term investments. 

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Investment in share market online: trading or investment?

Of course, intraday trading allows you to increase your capital much faster. At the same time, it is very risky. Traders are forced to closely monitor the situation on the market. As a result, they quickly become fatigued. This often leads to impulsive, wrong decisions and inevitable losses.

Other investors are more comfortable buying shares for the long term. One of the popular long-term investment strategies is buying dividend shares. In this case, the investors receive passive income in the form of dividends. There is even such an expression: “buy shares and forget about them.” This strategy is much easier, but dividends typically don’t exceed several percent of the share price. Therefore you’ll need much more funds to buy enough shares to gain significant rewards. 

Which style suits you best depends on your psychological inclinations and how much time you can spend on investing. It can be difficult to make the right choice at first. But the task becomes much easier if you open a demo account for training. 

A demo account models real deals, but the investor trades with virtual funds. Such an account may be useful for starting investments in the share market online and defining how effective and profitable your trading strategy is.

Summing up

You are unlikely to become a good investor if you are only interested in getting returns. Nobody will succeed in anything he doesn’t love. Do things that you enjoy. This is absolutely true in the case of investing. Don’t focus on returns. Investing is interesting in its own right: it is a special world that reveals its secrets to enthusiasts. And capital will surely find you, as a fair reward for your efforts.

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