B. Gopkumar
Investing is one of the most important habits that one should inculcate. However, the entire process and jargons used in the investing universe makes it seem complex and intimidating. That said, beginners in this arena don’t need to unnecessarily fret over this.
The basics are not half as complicated as it’s made out to be. By following a few tips designed to simplify the investing process, one can soon get a grip over it and start feeling more confident and comfortable. A strong foundation, to begin with, provides us with the much needed head start towards securing our future.
Disciplined investments in equities, over long periods of time, have proved to outperform returns over every other asset class in India. In the past 15 years, the Indian capital markets have witnessed a huge surge in activity and have proved to be an engine of economic growth.
The move in the capital markets has attracted participation from a diverse set of domestic investors ranging from urban to rural, from home makers to the skilled investors et al. Over these years the Indian capital markets have undergone a lot of changes.
Physical visits to the broker are virtually eliminated thanks to technology which enables us to trade online via our desktop or hand phones. Transaction costs have come down steeply thanks to increased competition. Access to information has dramatically improved thanks to increased online penetration and better bandwidth.
Investing has surely become a much simpler process as compared to earlier days. However, there are some key factors one must keep in mind while dealing in capital markets and other related products.
Here are tips that should prove handy while dealing with a broker:
Research on the brokerage house first before enrolling
Choosing an appropriate broker to trade through is one of the most important decisions that one needs to make. The choice you make has ramifications on the returns you eventually end up making; commissions you pay, efficiency and honesty in trade communication, stability of the trading platform et al. Before opening a trading and demat account with a brokerage house, it is better to do some research before entrusting your hard-earned money with them. This can help you avoid problems later. A personal visit to their office helps build confidence while online availability of key data should help you compare the cost benefit offered by competition, before making any decisions. Also, learn about which products and services the firm offers and how they would meet your needs. Be wary of anyone who promotes a one-size fits-all approach to investing or who touts only one particular product. As a thumb rule, it’s better to avoid brokers who are relatively smaller and unheard of.
Check the firm’s registration and licences
It’s always better to check whether the brokerage house is properly registered and licensed with the regulators concerned, SEBI for instance. A cursory glance through their website would help get some insights on their history and experience in the capital markets, disciplinary actions (if any), including past customer complaints, and financial health (including any outstanding arbitration awards or court judgments). Ask about the firm’s customer complaint record. Also verify the broker’s and firm’s registration, licensing and other background information from the exchange website or obtain a copy from the broker. Also remember, to offer advice on any variable annuities or variable life insurance policies, the broker must be licensed with the insurance regulator, IRDA, separately.
Don’t trust your broker blindly
The above steps should guide you to choosing a right broker through whom you could start your investments. Once you have started investing regularly, it is always advisable to check your demat account statement and bank statement on a regular basis. This should be cross checked with the trades done by you, to identify any anomalies. Extra margin money lying with the brokerage house, if any, should be called back for – to cite an instance. More importantly, please remember, it’s always better to avoid stocks with a questionable management profile and poor liquidity.
Don’t invest in everything your broker suggests
Remember, there is no substitute for hard work. It is always advisable to use careful discretion before making your investment decisions. Avoid investing into stocks merely on hearsay and by listening to “tips” on account of being buckled by the left-out feeling. Recollect the dialogue from the popular movie, The Wolf of Wall Street (2013): "OK, first rule of Wall Street — Nobody — and I don't care if you're Warren Buffet or Jimmy Buffet”. So beware of the so-called expert opinions you come across randomly.
Have patience
This is the most important factor to follow, and the most difficult as well. The general tendency of a naive investor as advised by stock broker is to follow the herd mentality; buy when everyone else is buying and sell when everyone else is selling as well.
Trust me, this does not work. Never. Stay with your investments, nurture them till your goals are not achieved and exit only if either your return targets are met or your investment theory has proved to be wrong. Money making is a time consuming, but a rewarding process. Rome was not built in a day, remember.
Investing is one of the most important habits that one should inculcate. However, the entire process and jargons used in the investing universe makes it seem complex and intimidating. That said, beginners in this arena don’t need to unnecessarily fret over this.
The basics are not half as complicated as it’s made out to be. By following a few tips designed to simplify the investing process, one can soon get a grip over it and start feeling more confident and comfortable. A strong foundation, to begin with, provides us with the much needed head start towards securing our future.
Disciplined investments in equities, over long periods of time, have proved to outperform returns over every other asset class in India. In the past 15 years, the Indian capital markets have witnessed a huge surge in activity and have proved to be an engine of economic growth.
The move in the capital markets has attracted participation from a diverse set of domestic investors ranging from urban to rural, from home makers to the skilled investors et al. Over these years the Indian capital markets have undergone a lot of changes.
Physical visits to the broker are virtually eliminated thanks to technology which enables us to trade online via our desktop or hand phones. Transaction costs have come down steeply thanks to increased competition. Access to information has dramatically improved thanks to increased online penetration and better bandwidth.
Investing has surely become a much simpler process as compared to earlier days. However, there are some key factors one must keep in mind while dealing in capital markets and other related products.
Here are tips that should prove handy while dealing with a broker:
Research on the brokerage house first before enrolling
Choosing an appropriate broker to trade through is one of the most important decisions that one needs to make. The choice you make has ramifications on the returns you eventually end up making; commissions you pay, efficiency and honesty in trade communication, stability of the trading platform et al. Before opening a trading and demat account with a brokerage house, it is better to do some research before entrusting your hard-earned money with them. This can help you avoid problems later. A personal visit to their office helps build confidence while online availability of key data should help you compare the cost benefit offered by competition, before making any decisions. Also, learn about which products and services the firm offers and how they would meet your needs. Be wary of anyone who promotes a one-size fits-all approach to investing or who touts only one particular product. As a thumb rule, it’s better to avoid brokers who are relatively smaller and unheard of.
Check the firm’s registration and licences
It’s always better to check whether the brokerage house is properly registered and licensed with the regulators concerned, SEBI for instance. A cursory glance through their website would help get some insights on their history and experience in the capital markets, disciplinary actions (if any), including past customer complaints, and financial health (including any outstanding arbitration awards or court judgments). Ask about the firm’s customer complaint record. Also verify the broker’s and firm’s registration, licensing and other background information from the exchange website or obtain a copy from the broker. Also remember, to offer advice on any variable annuities or variable life insurance policies, the broker must be licensed with the insurance regulator, IRDA, separately.
Don’t trust your broker blindly
The above steps should guide you to choosing a right broker through whom you could start your investments. Once you have started investing regularly, it is always advisable to check your demat account statement and bank statement on a regular basis. This should be cross checked with the trades done by you, to identify any anomalies. Extra margin money lying with the brokerage house, if any, should be called back for – to cite an instance. More importantly, please remember, it’s always better to avoid stocks with a questionable management profile and poor liquidity.
Don’t invest in everything your broker suggests
Remember, there is no substitute for hard work. It is always advisable to use careful discretion before making your investment decisions. Avoid investing into stocks merely on hearsay and by listening to “tips” on account of being buckled by the left-out feeling. Recollect the dialogue from the popular movie, The Wolf of Wall Street (2013): "OK, first rule of Wall Street — Nobody — and I don't care if you're Warren Buffet or Jimmy Buffet”. So beware of the so-called expert opinions you come across randomly.
Have patience
This is the most important factor to follow, and the most difficult as well. The general tendency of a naive investor as advised by stock broker is to follow the herd mentality; buy when everyone else is buying and sell when everyone else is selling as well.
Trust me, this does not work. Never. Stay with your investments, nurture them till your goals are not achieved and exit only if either your return targets are met or your investment theory has proved to be wrong. Money making is a time consuming, but a rewarding process. Rome was not built in a day, remember.
