None of what follows should be construed as investment advice. This article was written and contributed by a Digit reader. The views expressed are of the reader alone and not necessarily endorsed by Digit or the publisher.
Great! Now that that’s out of the way, let’s get down to investing. Assuming you’ve decided to make your money work for you by investing in the stock market, it’s probably a good idea to learn and experiment with more things related to it before you go all-in with your money and possibly, lose a significant portion of it. If you’re an ‘experienced’ investor whose actions are driven by other expert investors, that’s probably a red flag telling you to learn more. Stock market investors are mainly divided into two parts, technical and value investors, and you need to know both of them to maximize returns. After all, knowledge gives you confidence and confidence provides you with the ability to predict the future, and that’s what we require the most, the ability to predict future prices – though you can’t be entirely accurate, you’ll increase your accuracy, which will ultimately increase your portion of the winnings. So get familiar with the resources in this article and increase your odds of winning.
The right place to learn from
When I wished to learn about the stock market in late 2015, all the websites recommended a book named “The Intelligent Investor.” I bought it of course, but here’s the bummer, the book was hard to comprehend. It involved all kinds of abbreviations that made no sense to me. I barely made it through five chapters before giving up – now I realize that that’s okay. I just needed the right resources which I eventually figured out:
- Preston Pysh ‘Lessons on Buffet Books’: A free three course series available on YouTube that will get you familiar with the ‘behind-the-scenes’ of the stock market. It was also the first place that actually taught me something.
- The Intelligent Investor Video Course: Pair up this course with the book, ‘Intelligent Investor,’ and you’ll end up with an invaluable resource of knowledge. This is not free but is more valuable than spending money on some random trading course.
- Zerodha Varsity: No matter how hard you try, you can’t avoid this. The two mentioned above will help you with value investment, and Varsity will assist you with any remaining questions that you may have. Also, it’s free.
It would take you approximately a month or two to complete the above three courses, but let me assure you, you will have already learned more than the majority of ‘investors’ out there. Also, bookmark www.MorningStar.in which is going to be your companion forever. It lists financial details of all
the companies out there in a very user-friendly manner (only if you’ve gone through those courses).
It’s always a better idea to experiment with virtual cash before investing real money. Or maybe you could maintain two portfolios, actual and virtual, where you play safe in one and take risks in the other – and then compare which profile suits you more. No matter what your motivation may be, it’s always a good idea to have experimental virtual cash. There exist a lot of simulators, and they vary from market-to-market. If you’re investing in Indian markets, NSE, or BSE, then I recommend using moneybhai.moneycontrol.com. If you’re willing to trade at the NYSE, then switch to investopedia.com/simulator.
Before every trade, note down why you’re making that trade (if you’ve no answer, just don’t make the trade, the exception being intuition) and later, use this to analyse how your trade went
The right broker for you
The broker can make or break things for you, and that’s why it’s necessary to use the right one. In layman’s terms, we can classify brokers into two categories; brokers that help you with investments and also charge you, and the other type of brokers won’t assist you and will charge a very nominal fee. However, ‘you get what you pay for’ isn’t true here.
The first category are known as full-service brokers, and they will charge you between anywhere from ₹750 to ₹2000 annually plus approx. 0.25-0.5% of trade amount per trade. If you see yourself as a casual trader, someone who doesn’t want to put in research, someone who intends to invest without utilizing the full potential of the market then full-service brokers are for you. ICICIDirect, Sharekhan, and Kotak Securities are some of the leaders in this category. Choosing the best would be hard, it’s more about best-fit here. So, do your own research.
The second category is discount brokers, and I use them personally – because it’s always better to do your own research than to rely on ‘experts.’ They are significantly cheaper than full-service brokers, but this doesn’t mean that they lack customer support or features. In fact, they want you to do the research work, which in my opinion is inevitable if you’re investing – so why not start right away. They will charge you between anywhere from ₹0 to ₹1000 (one time or annually) plus ₹0 to ₹20 per trade (or 0.01%). Only a handful exist in this category, and personally, I prefer Zerodha. Also, using Zerodha you can automate trades, which is our next topic.
Imagine your software automatically trading on your behalf, on the basis of rules defined by you. That’s something a technical investor would love to have and that’s what Zerodha offers. You can program your own scripts, and the software will do its magic. You can even ‘backtest’ your scripts. Zerodha calls this ‘algoZ’ and, it is a very easy and to-the-point language.
Learning this language is a piece of cake, visit this link to get your hands on it.
Stock Screeners are like filters, but for stocks. You input your rules, and the stock screener will return back with companies that comply with those rules; thus, eliminating the need to go through thousands of companies.
Google used to offer an excellent stock screen but it’s kind of broken for the Indian market these days. Personally, I prefer using Investing’s stock screen which you can find here.
Now, it’s your turn to leverage these tools and build a fortune for yourself. But beware, we’ve all heard this, “investments are subject to market risk. Please read scheme related documents carefully before investing.” Good luck trading!
Note: This article was written and contributed by a Digit reader who is part of the Digit Squad. The community section intends to showcase writing talents from readers who wish to contribute to the magazine. None of the above is to be construed as investment advice. The views expressed are of the reader alone and not necessarily endorsed by the publisher.
This article was first published in the March 2017 issue of Digit magazine. To read Digit’s articles first, subscribe here or download the Digit app for Android and iOS. You could also buy Digit’s previous issues here.