Often enough, initial investments are done without proper planning, homework or understanding one's requirements. Prasenjit Paul from Kolkata recalls his maiden steps in the stock market. "I started intra-day trading without adequate knowledge and suffered a huge loss by taking deliveries; the value of my portfolio reduced by 30-40%. I couldn't use the stop-loss arrangement and the losses kept increasing," says the 22-yearold. Paul learnt from his mistakes quickly and today runs a stock advisory firm.
For first-time investors, identifying the right initial investment can be a challenge. Where should I begin? Should I play safe and invest in a fixed-income instrument that offers guaranteed returns? Should I go for high-growth investments like stocks or equity mutual funds? You have to be careful with your choice to ensure that you begin on a solid footing and build a stable foundation. It should provide a sense of confidence as you move ahead. As Lao Tzu, the Chinese philosopher, said, 'A journey of a thousand miles begins with a single step.' In the following pages, we offer you a helping hand as you take your first step.
EQUITY
Many of us choose to stay away from the stock market because of the risky nature of such investments. For some, it is akin to gambling in a casino. However, we also hear of stories where people have made fortunes from stocks. Some of your friends, relatives or acquaintances will recount their experiences of doubling or trebling their money within a short span of time. Naturally, this gets you thinking. Should I try my hand at the stocks game? How can I make handsome gains from equities? More often than not, you take the plunge. You open a demat and trading account, and make your initial purchase—possibly a strong blue-chip company that you admire, or an emerging company you have heard a lot about. Either way, this may not be the ideal route for everyone.
WHY TO INVEST
If you have made up your mind to invest in stocks, make sure you are doing so for the right reasons. If you are looking to make quick gains and exit, then you are setting yourself up for long-term pain. Unless you are able to time your entry impeccably, you cannot earn good returns consistently. Equity is an asset class that rewards you the most if you stay invested for a reasonably long period of time. It is probably the only asset class that has the potential to beat inflation over the years. It is crucial that investors come equipped with the right attitude and understand the risks involved. Hemant Rustagi, CEO, Wiseinvest Advisors, urges first-time stock investors not to treat it as a source of excitement. "Stock investing is not a gamble. It is a serious investment opportunity," he says.
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