March 12, 2019

12 reasons why you should invest in the stock market

Blog | Trading 101

For a lot of people, stock market is the equivalent of gambling. One places big bets here, speculates, gains and loses big money, and so much more. In short, the stock market = a game of cards. However, the opposite of it is true.

While speculating is a part and parcel of the stock market, it is not necessary that one has to do it in order to gain from the market. While speculating may be a high risk-game, trading is something you can do scientifically. In fact, once you have opened a demat account, you must trade! There is merit for you and for your money.

A dozen reasons to trade; nay a baker’s dozen

You can play short-term trends in the market with trades. What is the point of believing that a rate-cut will help banks but not acting on it? Open your trading account, put a trade, and make money.
You don’t need a large capital to trade. So don’t let that stop you. With just Rs.750 (approx), you can buy one stock of Infosys. Your returns may be small but your risk is small too.
The beauty of trading is that you can learn trading along the way. Nobody starts off as an expert trader; not even the best of traders. You take small risks, learn along the way, and once you are confident, you graduate to placing bigger bets.
Costs are low, thanks to discount broking platforms like Upstox available to you. Here, you can execute a cash market trade at zero cost. You only pay the minimum statutory charges applicable.
Trading is convenient and you can trade online through your PC or a mobile app like Upstox Pro. Trade out of the comfort of your home or even when travelling in the train, bus or car.
Trading can be done scientifically using research, analytics, screeners and charts. It is based on a body of knowledge and is a lot more reliable if done systematically.
Traders eventually morph into long term investors once their conviction in equity is built up. In the long run, it is equities that create wealth for investors and help them meet their long term goals.
An important aspect of trading is that you can become part owners of the company. An investment of Rs.10,000 in Wipro in 1980 would be worth more than Rs.600 crore today. That is the power of owning shares!
Traders benefit from owning shares in two ways. Firstly, there are dividends received on the shares you hold. Then there are capital gains that you realize when you sell shares. In case of losses, it can be written off against current or future profits to reduce tax.
You can trade multiple asset classes with a single trading account including equity shares, ETFs, index futures, index options, stock options, currency futures, and even currency options through a single trading account.
You can trade futures and options to hedge your risk. For example, if you have bought Reliance, you can protect price fall by purchasing Reliance put option.
Trading makes it possible to not only buy shares but also sell shares and buy it back. If you feel a stock is going down, you can either sell for intraday, or sell futures or even buy put options. The choice is yours.
Last, but not the least, trading in stocks is extremely transparent. You can see the price at which the trade is executed and you can see your debits and credits to the demat account and trading account.