How To Invest In Stocks

by Dilip Shaw Date: December 22, 2016 Updated: September 21, 2020

in Investments

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Read to know how to invest in stocks and invest the way Warren Buffett invested in stocks.

Indian stock markets are down more than 10% from recent high, this is a great time to invest in stocks. In future also remember that:

Whenever there is more than 10% fall in major stock index in your country, just get in and buy great stocks in SIP (Systematic Investment Plan) method.

Since Indian stock markets have fallen a lot it is a great time to buy stocks. For long term investors and non-directional traders this is the best time to make profits. India’s top stocks are at a great level to collect for the long term.

It is always a great idea to research stocks which have the capability to enter the stock market index. In India the most popular stock index is Nifty. Here is the list of top 50 companies that make Nifty. It is highly recommended that you invest in the best 4 stocks from different sectors that are in the top 50 list. When your country’s stock exchange has already hand-picked the stocks for you why do further research? They have a very strong selection criteria to pick stocks that can make to this list, then why bother about other stocks?

Some of the big giants that you can buy in the SIP (Systematic Investment Plan) mode are Infosys, HDFC, SBI, L&T, ONGC, Axis Bank, Maruti Suzuki, Tata Steel, Hindalco Industries. These are strong companies and have fallen a lot. Please note that this is not a recommendation to buy these stocks. I am only giving you ideas to research on these stocks. Please do your own research and invest as per your capability. Also remember that stock markets investments are subject to market risk, so please thoroughly research before investing in any of the above stocks.

What is SIP Method of Investing?

SIP is known as Systematic Investment Plan. SIP is highly popular with Mutual Fund Investors, because Mutual Fund industry has advertised Systematic Investment Plan in a great way – in news papers, TV, magazines, websites, emails etc. Therefore Mutual Fund Investors know about SIP very well and automate the whole process and make a lot of money. I am mutual fund investor too.

It is really strange that stock investors, not just in India, but in the world are not much familiar or interested in investing in stocks in the SIP method.

One reason is that our brokers do not advertise investing stocks in SIP method. They just tell us to buy as much as we can. Because the more you buy, the more money they make. Then what happens is known to the investor only, brokers are least bothered because they have made money, why should they bother about their investors?

Another reason is Greed – a traders biggest enemy. Most stock investors think it will take months or years to make 10% on a small amount so why invest in phases? They invest millions of rupees in one go as soon as they get a green signal from their brokers, and then scratch their heads when they see the stock falling down.

Once they see a loss of 20% or more they exit. It is strange that after they exit, the stock starts to move up. This makes them more frustrated.

This is not the correct process to make money from investing in stocks.

Do not forget that unlike derivatives stocks do not have an expiry date. Big companies are here to stay forever.

The best investor of all times Warren Buffett made a lot of money investing in good company stocks. In 20 years he went on to become the richest man in the world investing in stocks.

But all over the world you will see many stock investors losing millions investing in stocks.

Why they cannot copy what Warren Buffett did? The reasons are pretty simple:

No research on the company they want to invest in.

No investment plan – just invest with whatever money they have.

No patience. One month is the average wait time with most no-patience investors. Therefore 90% of them exit with losses.

Not willing to average even though wait time in stock investments is unlimited. Stocks are not options or futures that you should not average. If you are an Options buyer or seller, it is highly recommended that you do not average your options or futures whether you are losing money or making money. You must have a trading plan and act accordingly.

Coming back to stocks, since they do not have an expiry date, you must average them as long as they keep falling from your average buy price.

Read this article to know How To Chose Stocks To Invest Using Economic Moat.

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Open ZERO Brokerage FREE Share Trading Account - Buy and Sell Stocks Without Brokerage - Set GTT (Good Till Triggered) Orders on System and Forget

Traditional brokers charge a lot for brokerage; however, this broker does not charge anything for stock buying and selling. Also, you can set GTT (Good Till Triggered) order after buying a stock, so that the system can sell the stock automatically at your target price even if you are not monitoring the market. Only 25k is blocked for option selling with hedge. Also, you get a lifetime free account in Sensibull (virtual trading app & strategy builder) which charges Rs.800/-+GST a month. It takes 5 minutes to open an account online. Click here and Open Free Account with Them Today >>

About the author: Dilip Shaw I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.