Prepare yourself

I have seen most of the first time investors losing big money in the stock markets and you would come across a number of such investors with terrible experience in stock markets that they hate to even discuss about any shares and feeling very secure with their money being invested in Bank Fixed deposits, traditional insurance plans and Government bonds with a return of about 8 percent a year. They had a sour experience because they had not prepared themselves for investing in stock markets, they simply saw some other fellow making huge money on some news driven stock and next time put a huge sum on his advice or saw an expert on a news channel strongly recommending a stock and the markets turned otherwise. Such people do not dare to take another chance and believe that perhaps they are not made for it and resolve not to even look at it during rest of their lives. The experience might have been different if they would have spent some time researching and had some patience before making a first time entry. Some basic steps for the first time investors are listed hereunder which will be useful to make a successful entry into the stock markets and for those as well who had a terrible first time experience.

Get a feel of the stock markets.
Before entering the markets it’s always recommended to spend some time understanding them. When you go for shopping you spend some time visiting shops in the market to have a look at various designs and prices and then decide which merchandise you want to buy, similarly before buying stocks you must visit the stock markets, understand them, have a look at various stocks available and then pick one of your choices. Well it’s not as easy as writing it or recommending to someone; actually it’s a tough job even for those who have spent a long time in markets. But I would still maintain that the research done by you is the best.

Spend some time with business newspapers and business news channels.
Start reading the daily business papers, particularly the stock market pages and try to correlate the news on companies to the movement in their stock prices. For example, recent news that Suzlon buys control in RE power pulls the price of Suzlon up by more than 7 percent in a day and sound quarterly results and announcement of bonus shares moved the stock price of NIIT Technologies more than 12 percent in a day similarly a poor show of quarterly results by Punjab National Bank saw its stock price fall by more than 4 percent in a day. In a few days your eyes will automatically be able to catch the price sensitive news in the papers. The next stage is to remain updated by watching Business channels as the news you get in newspapers in the morning might have been broken by the channels on the previous day, and in this world of fast moving information you need to get the news as it is broken. It may not be possible for you to watch TV during office hours, and then you may browse through some good websites to keep yourself updated.

Have patience, do not panic to invest.
Once you allocate some money for investing in stock markets, it becomes very difficult to control your nerves and sit on cash till you discover a dream stock at a dream price. Your first entry should be after a lot of research and it may take a few months waiting for the right opportunity but your first stock should not let you repent on your decision. Consider all factors, the macro economic factors, the trend of the markets and the overall global scenario, the cycles, the technical of the markets, fundamentals and technical of your target stock to make your first move.

Do your own research, don’t follow street calls blindly.
Try to do your own research before buying a stock. You may take a tip from a friend or an expert, but research yourself before making an investment and if your own research justifies the decision then go for it and if you think otherwise or you feel uncomfortable with the bargain then don’t go for it. There is no dearth of opportunities in the markets wait for the next one because in these markets sometimes not making a loss is also a profit.

Create a paper portfolio.
Now when you feel ready to kick off, its time to test your skills I know we all hate this, still it is worth being honest with yourself. Make an excel sheet on your PC and create a portfolio based on the knowledge you have gained including well analyzed tips from your friends and experts and see the performance of your portfolio over a period of time. You will be able to realize when you can make a real portfolio.

Always invest in stock markets with the surplus money.
Last and most important advice is to make investments in stock markets with the surplus money. If you are able to set aside an amount after incurring all routine expenses, paying your installments, premiums for life and health insurance and the EMI of your house, then it can be dedicated to the stock markets. If you have yet not bought a house, I would recommend you to do that first before entering the stock markets. And never take a loan for investing in stock markets, whatever justification your calculations may give.