When 10-year-old kids picked shares. Compared to them, chartered accountants also picked shares. 10-year-old kids picked better stocks. They earned more money. How did 10-year-old kids do this? It is said that if the base is good. Then the building becomes good. Today, we will build a strong foundation in the stock market. You can earn so much money. You can build many buildings of your own.
We will cover all the basics of the stock market. Beginners are scared to hear the name of the share market. We have seen in movies that everything is ruined by the share market. Some friends claim they are earning a lot of money. Still, there are your family members. They say, “Stay away from it.” On top of that, you may have studied commerce in school and college. You still have not properly explained the share market. In such a situation, confusion and nervousness are very necessary. Today, all your confusions are clear. You will know where and how to invest.
First, let’s share a fun fact to pique your interest. If 40 years ago in Wipro. Maybe you were not even born then. Someone in your family had invested Rs 10,000 in Wipro’s share. Today, after 40 years, it would have been Rs 700 crores. You will have a question in your mind. Who had Rs 10,000? If you had invested Rs 1,000. It would have been Rs 70 crores. If you had invested Rs 100. It would have been Rs 7 crores.
This is the potential of the stock market. Now, don’t think with this example. You must not enter this market at any cost. Definitely, there is a risk in the market. Just as there is profit. There is also loss. In fact, there are many such stocks. If you had invested Rs 700 crores. It would be Rs 10,000 today. The more profit this market can make. The more loss it can make. Your loss should be as little as possible. The benefit should be as much as possible.
Is the Stock Market Risky?
Is the share market risky? Basically, you are buying a share. You are buying a small share in that company. That’s why it’s called share. You are becoming the co-owner of that company. If you invest money in a friend’s or relative’s business. That business does not run well. Your money will be lost. This is the risk. Similarly, you are investing in big companies in the share market. In the Tata, Reliance, and Godrej companies. Now, if that company goes under. Your money will go down the drain. If that company has shown strong growth. Your money will grow well too.
This is exactly like investing money in a family member or friend’s business. With the hope that if the business grows. You will get a share of the profit. If there is a loss, then fine. You will bear the loss. You will not get interest. You do not get interest in the share market either. This is not a loan. There are many such companies that keep drowning. Absolutely, there is a loss in that.
Look at Aishwarya Motors. Over the last 7-8 years, they increased bullet bike sales many times over. That’s why the shares have also grown many times. That is, 1 rupee has increased 10 times. Even 20 times. There are many such shares. TVS is such an example. It has increased 10 times over the last 10 years. MRF is such an example. There are many such shares. They give you 10 times the return in 5-6 years. Definitely, this is risky. That’s why the returns are also high.
What Return Can You Expect?
How much return will you get? If you invest money in a friend’s business. Who knows? If you invest 100 rupees. You will have a 10%, 20%, or 30% profit next year. This differs a lot. There can be no fixed criteria for this. Many shares in this market do not increase by 1 rupee for many years. Instead, they fall sharply. There are many such that increase 4-5 times in a year.
This is a matter of a single share. When you invest, you will not only invest in 1 or 2 shares. You will have to invest in a portfolio of stocks. That is at least 8-10 companies. One or two companies might go bad. Even if they go down. Still, your overall money should not go down. That’s why we invest in at least 8-10 companies in the share market.
There is a basket of stocks. You have invested properly. You can expect an 18-20% return in a high-growth economy like India. This is in the long run. That is if you have invested for at least 5 years. You are picking good stocks. You can definitely get a return of around 18-20%.
That is 3 times the current FD. It is almost twice as much as gold or real estate. There are many successful investors in the world. They are in low-growth economies like India. Markets and companies were growing slowly. There, too, they have picked stocks. These have delivered returns of around 30% for many years. If you are expecting a 20% return in India. This is not wrong. For that, stock picking should be good.
How Much Money is Enough to Start?
How much money is enough to start? How much capital you invest in the stock market is important. How you invest in shares giving a consistent return matters more. Start with only Rs 1,000 per month. Many of us can afford this at the beginning. We have to invest that Rs 1,000 per month in shares. You increase this Rs 1,000 by 15% every year. In the first year, you start with investing Rs 1,000 per month. This is a total of Rs 12,000.
From the next year, you increase it by 15%. That is, you invest Rs 1150 every month. Every year, your income increases. You move away from student life. You become an earning member. Or there is a promotion in your job. Your salary increases. If you do this. Start with Rs 1,000. Increase it by 15% each year. You get only a 15% return on your investment. Not even 18 or 20. Even then, starting with Rs 1,000. You will have Rs 1 crore after 25 years.
What is the key to this? You have to invest for 25 years. Second, you have to increase the amount by 15%. Third, you should expect a 15% return. These three things happened. After 25 years, starting with Rs 1,000. You will have Rs 1 crore.
How Easy or Difficult is it to start?
Is it easy to invest? If you have to invest. What is the process? The process is very simple. You just need 3 documents. You should have an Aadhar card. You need a PAN card and a bank account. If you don’t have it. Then open it. After that, the whole process is done online. There are many online discount brokers. They are discount brokers. These brokers charge almost nothing. You don’t have to do anything.
In 3-4 days, your account will be opened online. There is no physical paperwork. You can start trading. The account opens with Rs 300. The brokerage or commission takes almost zero. If you are investing. That is, if you are buying shares and keeping them. Then after 2-3 days or later, you are selling. You don’t have to give any commission. It is almost free. Some government taxes are required. You won’t even know about them. They are less than 0.1%.
Why Does the Share Market Have a Bad Reputation?
Everything is so good. Why is the name of the share market so bad? Why are people afraid of it? This name is a problem of mindset. When we buy property, we think about the price. If the price doubles in 4 months. We will sell it and leave. If someone buys gold. He passes it on to his descendants. He doesn’t sell it. No one thinks they will buy it today. After a month, the gold price increases. Then they will sell it. We give the property time to increase. We give time for gold to increase.
Your friends might tell you to come to the stock market. They will definitely say this together. They have earned 40,000 rupees in a day. Or their money has doubled in 2 months. That means their expectations are wrong. They come with this thought. They have to become rich from the share market overnight. Now, being rich overnight can be achieved through a lottery. Or, if your luck is good, through gambling.
You might play the share market like gambling. You are going to become the owner of a company. You are going to buy its share. You don’t know who its manager is. You don’t know the business model of the company. You didn’t know all this. You just saw a chart. Or you heard from someone and bought the share. There will be a loss in this. In the same way, people want to earn money quickly. They buy a penny stock at 1-2 rupees. That company has nothing in front of it or behind it. They think even if it becomes 1 cup 2. Then the money will double. But that 1 cup 2 does not happen. That company is not worth it.
It is most important when you come to this market. You do not think it will make you rich overnight. You should expect a return of 18-20%. If you get more than that. It is a bonus. That is, if you get a return of 18-20%. Your money will double every 4 years. Compare it with bank FDs. Money doubles in 11-12 years at today’s interest rates. This market can offer you 3 times better returns than that. This is enough. Do not be greedy more than this.
Can You Invest Without a Commerce Background?
You have studied engineering or arts. You have not studied commerce. Still, you can invest in the share market. You can. Your stream or educational background does not matter much.
Once there was a survey in the US. Some 10-year-old, 5th-grade children were told to pick shares. They made a basket of 8-10 shares. At the same time, the chartered accountants were also told to assemble a basket of 8-10 shares. Chartered accountants are the most educated people. After 5 years, it was seen which shares had given more returns. The children outperformed the chartered accountants. What engineering, commerce, and arts did the children study? Maths up to 5th, Hindi, English, and Science. You have also studied that much. You are also ready to compete with the chartered accountants.
Why could they do this? They were children. Which companies would they have chosen? Cadbury, Disney, Barbie. Such companies interest them. They are the customers of those products. Who will know a product better than the customer? The children used the products of those companies themselves. They chose the same companies. This indicated those companies were satisfying their customers. That company had to do well. That is why the children outperformed. At the same time, the chartered accountants read long balance sheets. They performed complex financial calculations. They did not see the ground reality. If you are an engineer. Choose companies that make real estate. Choose electrical machinery and related products. Choose those companies that you can judge. You will do pretty well.
In general, it is believed that female doctors are the best investors. They are doctors. They do not have financial knowledge. That is because they are very busy in their lives. Professional life, personal life, work. Even after coming home, and in this kind of work. They do not get much time for number crunching. They avoid complicated financial analysis. They have general knowledge of what products they like. Second, because there is no time. They forget to invest. Whatever they invested. They did not check for 5-10 years. As a result, transaction costs are lower. Compounding can have its full effect. Even if you do not know commerce, there is no problem.
How Does the Market Work?
Why is the share price increasing or decreasing daily? If you want to start a business. You need a little money. Your family, relatives, or friends will give it to you. If you need a little more money. The bank will give it to you. But you need 20,000 crores. Now, neither the bank nor your friends will give it. Your relatives will not give it to you. Unless, of course, you are from the Ambani family.
Who will give you so much money? The public. You explain your business model to people. You have a plan. You are going to build a factory. You will make a luxury car that runs on electricity or water. You need money. The people who trust you will give you money. In return, you will give them a share in your company. This is because they have invested money. That share will be called shares. You took the money. The people gave it to you. You gave them shares.
Now, it’s also possible that you got this share today. After two days, you need money. You have to sell that share. The company will not buy the shares from you. It needs money. By taking that money, it started building a factory. It doesn’t have money to give you. There should be a market. You can sell the company’s shares to someone else. This market is called share market.
You feel that Colgate is going to do well. Their toothbrush and toothpaste are selling more these days. You can buy their shares from someone else on the share market. Someone might feel that Colgate is going to do badly. Patanjali is giving more competition. Then he can sell the shares. Millions of people buy and sell in the share market every day. You always get a buyer or seller for your shares.
This is the importance of the share market. If you want, you can become a shareholder in Ratan Tata’s business. Buy the shares in one click. If you want, you can buy the shares of Adi Godrej’s Godrej Empire. If you want, you can become a Jio shareholder. Buy shares in one click. If you want, you can buy only one share. You can become a Jio shareholder. Proudly say Jio is yours.
Recommended Resources for In-Depth Learning
To learn investing at home. A favourite book is Rich Dad Poor Dad. After this, read Learn to Earn by Peter Lynch. It covers the basics of the stock market. After this is a little advanced level. But it is a lot of quality information. The book is The Education of a Value Investor by Guy Spier.
