How to Start Investing for Students (Stock Market Edition)

You’ve managed to save up a tidy sum of Rs. 50,000 from your pocket money and the odd jobs you picked up during the summer break. You could spend it all on partying and fleeting pleasures, living it up for a year. Or, you could make a smarter choice and invest that money in the stock market.

Sure, it may not sound as exciting as partying, but think about this - what if that small investment turned into a whopping Rs. 5 lakh in less than a decade? That's right, you heard it - ten times the money you saved up, all from making a wise investment decision.

Now think of all the amazing experiences and opportunities you can afford down the road - buying your dream car, traveling to your favourite destination, or even launching your own business in the future.

So, the question is, was that party really worth sacrificing a potentially life-changing investment opportunity? Let's explore this further!

Is a 10x return realistic in stock market investing?

Absolutely yes! Let us give you a few real-world examples of companies that have actually delivered such returns over a 10-year period.

Bajaj Finance Ltd. is an impressive example of a stock that has seen tremendous growth. In 2013, the share was valued at just Rs. 150, but as of 2023, it is trading at Rs. 5863, thus delivering an astounding 40x return in 10 years.

If you look at the compound interest, an investment of just Rs. 10,000 that yields around 50% return every year would have grown to at least Rs. 4,00,000 in a decade.

Likewise, our favourite biscuit, bread and dairy products manufacturing company Britannia Industries Ltd. saw its stock price rise from Rs. 300 in 2013 to Rs. 4340 in 2023, delivering an impressive 14x return in 10 years.

That is surely convincing!

Bursting the myth bubble around investing

If you are thinking you need huge money upfront to begin investing in the stock market, you are mistaken. It may come as a surprise, but you can actually begin your investment journey with as little as Rs. 1000.

## How to start stock market investment for beginners?

· Do your homework

Before you jump into stock market investment, it is wise to invest in your knowledge of the stock market. Educate yourself on the basics and understand how the market works to be better equipped to make informed decisions. Learn about stock selection methods, popular trading strategies, and the value investment methodology developed by legendary investors like Warren Buffett and Benjamin Graham.

Pro tip: Read books on investing, follow a mentor, research and study through publicly available information such as research reports and newspapers.

· Open a demat and trading account

A demat account helps you to hold all your securities in electronic form whereas a trading account helps you with buying and selling securities. You can open your demat and trading account with a depository participant that can be a bank, a non-banking financial institution or a brokerage firm.

Remember: When choosing a depository participant, it can be advantageous to compare their trading fees and annual demat account charges so as to save a substantial amount in the long run.

· Make investments that best suit your target

Understand your investment goal, personal investment capacity and risk appetite before investing in stocks. This will help you frame an appropriate investment strategy that best suits your individual goals.

A valuable piece of advice: Don't follow the herd mentality when investing in stocks. Just because your friend invested in a stock, doesn't mean you should too. Conduct thorough research and analysis, taking into account your own financial objectives and risk tolerance before making any investment decision. Blindly following others could lead to potential losses.

· Adopt a realistic strategy

As a student, you may not have substantial savings to cover potential losses in investments. Therefore, it makes sense to adopt a practical investment strategy that minimizes risks. This can be achieved by building a diversified portfolio.

Diversifying your portfolio means investing in a range of securities across different sectors (such as healthcare, technology, energy, financial, etc.). This strategy reduces the impact of market fluctuations on your investments. When one investment is declining, another might remain stable or even increase, thus balancing out your overall portfolio and minimizing risk.

· Monitor your portfolio regularly

A portfolio health check is crucial to understand its performance, identify hidden risks, and make informed decisions about entering or exiting the market. Periodically monitoring your investment portfolio enables you to take appropriate action, resulting in better performance even during tough market conditions, and safeguard your financial future.

Wrap-up

Start investing early and let time work its magic! Don't miss out on the opportunity to gain real-world money lessons and work towards your financial freedom.

Ready to get started? Let's make your money work for you! If at all you need some extra funds, NuCash can be your go-to fin-friend. Contact us to understand how we can help you!