Many excited investors dive into the stock market without knowing the structural working of the equity market. Foremost important is knowing why he is landing into this platform. What is he expecting out of it?
Few points to know before your jump into direct buying of stocks
- Are you an Investor: Investor is one who invests in business for a very long time(7-10 years) Number of years being invested depends on how well you understand the business and how well the investment thesis is still valid when you have analyzed it while selecting the stock or the business.
- Trader: Here comes an opportunistic investor who is looking for quick gains in a shorter time period. Investors are not worried about business and are just looking for news, technical charts, and other information to make the most of it.
- Long Term: Officially long term is a minimum of 365 days. Investors holding a stock for a minimum of 365 days is the Long term investment. (365 days) is purely for tax purposes. Long term tax is 10% any profit from equity above 1L (One Lakh).
- Short Term: Officially short term is less than 365 days. Investors selling the stock within 365 days of purchase is known as short term investment. Short term tax for equity is 15% plus other taxes sum to 17%.
- Capital preservation: Most important parameter for any kind of investor is the money, quotes from famous billionaire investor — Warren Buffett
Rule 1: Never lose money
Rule 2: Never forget rule no 1.
- Borrowed money/Borrowed tip: This is the most disastrous thing waiting to happen for any investor. Never try or get into this zone.
Investors should always be prepared for what they are expecting while investing and should analyze whether they can devote more time every day to know how short term investing works.
I would advise investors to start understanding how the stock market/equity markets work or behave in different situations and start with very minimal investment to understand it better. Please do comment or give your suggestions about anything to add or want to know about anything specific.