Investing your money for beginners

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How to Stop Overspending of money? What are the best shares to buy for beginners in India? Investing in shares for beginners can be tricky as they are not very conversant with stock investing. While dealing with shares, beginners must realise that they are playing with fire. If beginners invest in stocks without sufficient know-how, it is like playing with fire. Hence learning how to invest in shares is essential for beginners. Shares are inherently risky form of investing money.

The risk of loosing what is invested is very high. But the probability of making big losses is also very high in shares. If practiced with knowledge and care, share investing in India can give high returns, even to a beginner. But before buying ones first shares, a beginner must FIRST know aboutĀ the alternatives of shares.

It is only logical to first compare and then arrive at a conclusion. Comparing alternative investment options will highlight pros and cons of shares to a beginner. Investing in them is like indirect investing in shares. Select the right investment alternative Beginners must select the best alternative for themselves. And the best alternative will be the one that commensurates ones requirements. But this is also true that requirement alone cannot drive the selection. It is essential for beginner to understand this concept clearly.

When I was learning to ride a motor bike in an early age, my objective was to learn and drive the bike like a racer. But eventually I realised that with my skill-set, I cannot drive the motor bike beyond a certain speed. I do not have a bike like Valentino Rossi. This kind of realization is essential for investors as well.

We all want to earn high returns. To earn high returns we must keep our investment locked for long period of time. Do we have that much time in hand? Do we have a personality that match the required risk profile? A beginner can build ones risk profile.

While starting, when knowledge about shares is zero, risk profile is very narrow. In this situation investing in shares will predominantly lead to losses. But with knowledge gathering, risk profile becomes wider and wider. In such situation, investors are more likely to take calculated risks. Here the possibility to earn high returns is very probable.

So for a beginner, knowledge gathering about shares is key. If requirement is to earn high returns, then the preferred alternative should be direct investing in shares. There is no doubt that good shares can give higher returns. It is essential to buy good shares and hold it for long term. What it means by good shares? Shares of fundamentally strong companies, bought at a right price becomes good.

No matter how big is the company, if it is not bought at right price, it is not good. E ratio tells very less about the price valuation of a stock. So good stock bought at right price will do the work, right? No, it is also important to give it theĀ time to grow. Otherwise even shares like Apple Inc can give negative returns. As a rule of thumb, one must hold on to purchased shares for a minimum of 4-5 years. The longer is the holding period the better risk aversion is possible.