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Baby Steps to Stock Market Investing

Headlines like “Best investments for 2014” or “10 stocks to bet your money” or “Investment not to be missed in 2014” are on the newspaper shelves and magazine stands. The sophisticated nerds on television will talk about outlook for 2014, Sensex estimates for next five years. It will probably make your head spin. I know Gruhinis, most of us just flip through those pages or switch channels because we don’t really understand it. Some of us don’t have the courage to stick out our neck and take this kind of financial decision on our own.

This post will help you overcome the fear of stock markets. You don’t have to speak the language of nerds or use financial calculators to know graphs, balance sheets etc.

As Warren Buffet, the most admired American investor of our times says, all you need to do is to understand the business of a company and how to invest in it.

Still not convinced? Go ahead and consult your spouse or family members. The chances are that you might hear something like “tumhare bus ki baat nahin hai” or “don’t lose our hard earned savings”. Someone else will tell you “Remember your uncle lost all his money when markets crashed in 2008. So beware”. At that point you should tell them what Terrance Odeon, a California University professor found in his research. According to him, Men tend to be overconfident than women and that’s why they trade (frequent buying and selling of shares) more frequently and earn less returns than women. This statement will silence your detractors!

The Great Gruhini will tell you how to take baby steps in a sea of professional swimmers (aka stock markets full of brokers, investors).

PolarBearSwimming4 If the bulls and bears are doing it, surely so can you!!!

 Step 1: Know the depth (business) of the sea  (companies whose stocks you will buy)

As a well informed swimmer would first understand the depth of  the pool or the sea, the kind of the sea animals present out  there, you ought to first understand the stocks or companies  you are going to invest in.

 What comes to your mind when I say “your favourite brand”. It  could be a company you (or your husband) work for. It could  be a favorite brand of oil, ketchup in the kitchen, the bathing  soap brand, a jewellery brand you wear, the car or the wardrobe  brand you own, your grocery store or even the brand of paint on your walls. Or you are addicted to the latest TV thriller? How about the production house that makes that TV show! In my house I can associate with Nestle, Godrej Industries, Tanishq and Asian Paints as my favorite brands.

You should understand what the company does or produces. If your husband works in oil and gas company and you don’t understand how they make money, drop the name. Think of another brand in your house. List out or write down these names, lest you forget it.

Is your favourite brand listed on a Stock Exchange?
The next step is to check if the company manufacturing/producing your favorite brand has given out its shares to public. If it has issued shares to public, it must be traded on a stock exchange. Here your internet skills will come in handy. Log into company’s website which should have a section for “Investors” that will tell you about the share price, the stock exchange it’s listed on apart from other information. Another way to check out is to search for share price of the company, but chances are you will find lot of links which can put you off. If it’s not listed, then pick another company from the list.

Step 2: Swim in shallow waters for some time
For the next few days, just watch the company’s share price and read the news about the company in the newspapers or on the business channels. You don’t have to miss your favorite serial for this!

Test the waters, with sites such as google.com/finance. This site allow you to create an online portfolio to enable you to track your stocks. You just have to add the list of the companies you liked. Without learning the real strokes, you will get to know the depth of the water.

No one learns to swim without getting wet!

Still find it difficult to stay in water?  Write to me at thegreatgruhini@gmail.com

 

About Rachna Monga Koppikar

Rachna aka your Great Gruhini is a finance writer with over a decade's experience in writing about personal finance matters with leading financial publications of India. As she studies to be a certified financial planner, she is also on a mission to make every woman a money savvy individual. So shed your inhibitions. Get over your money worries with The Great Gruhini. Write to her at thegreatgruhini@gmail.com

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One comment

  1. Hi Rachna,

    Good article. House wives know more about the future multibagger stocks than the gents, according to Peter Lynch as they are the end customer. Just the husband has to listen to wife!

    Anyway, you can also write an article about the stock brokers so that your readers can benefit from it.

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