Trading in the stock market is something everyone must have heard of. But many people, especially the beginners, do not have a clear idea about certain things concerned with the stock market. Hence, it becomes important to throw light on the most important things which beginners do not or may not know about the stock market. Moreover, having a brief idea becomes extremely important for newbies, which should take time to learn about the market by reading a few stock trading guides on the internet.

The stock market refers to a place where stocks or shares are issued, bought and sold. A share refers to a unit measurement of a company’s ownership and also serves as the documentary evidence of the same. The number of shares you hold signifies the part of ownership you have in the company. This brief definition of the stock market for beginners should be more than sufficient.

Stock Market Trading For Beginners

Now that you have got some idea regarding the stock market, it is time to move on to the things you must know about trading in it. This is important to know because the stock market for beginners can turn out to be a different world and not knowing certain things might unhinge your plans.

1. Diversified Portfolio

Stock market for beginners seems quite promising as they can easily figure out which company is going on profit and hence is best to invest in. But do you know investing in a single company even if it is promising can put you in massive risk? Since the stock market is volatile and keeps fluctuating you can never know for sure what is the right time to invest. If the company you have faith in all of a sudden starts falling in their profit level margin and even faces loss, it should not come as a surprise.

The ideal thing to do here would be to diversify your investment portfolio. Invest in mutual funds and EFTs, if you can, so that one company’s failure will not affect your overall investment.

2. Over-diversified Portfolio

If diversifying your portfolio can help you cope better with the losses, then over-diversification can curb your profits as well. This is the reason where not just the beginners but even the experienced investors go wrong. If a company happens to profit say 60% in a year then the profit you can expect from it will not be much because you have few shares in it.

As there is no golden number for a specific number of shares which will yield high profits with marginal risk, you should prefer to play safely first. What this implies is that as a beginner you should be more cautious rather than adventurous. Stock market for beginners should first be a place of gradual growth than instant fall.

3. Penny Stocks

Beginners start investing with a small amount. So it is natural for them to want to get as many shares as possible. Cheap shares which can be easily bought in large numbers are called the penny stocks. Penny stocks have a much lower chance of doing better than the normal stocks for they are often issued by companies who are starting up and looking for capital or companies facing loss. Hence, their probability of success is not as competitive as one would want them to be.

Therefore, buying a large number of shares in the stock market may be easy but the important thing is to keep in mind their competitive quality in the ever-fluctuating market.

4. Rapid Trading

Stock market for beginners teems with new opportunities every day. New companies show up every day promising lucrative returns on investment. This makes many investors jump ship from one company to another. But the unpredictability of the market never keeps the same graph of profit or loss. The company which is soaring today can fall just as steeply tomorrow.

The unpredictability of the stock market makes it impossible to ascertain the performance of a company.

The prudent thing to do here is to keep faith in the company you have first decided to invest in. Stocks take time to grow. Expecting that a more promising venture will provide you with better returns does not always hold. But if you have invested for a considerable time in a particular company, there are better chances of you getting a handsome return.

5. Taxation

Selling your shares can give you short or long term capital gain or loss. But do you know it is also taxable? If you sell your shares within 12 months of the purchase then depending on whether it is sold on profit or loss it will be called short term capital gain/loss. Whereas if the shares are sold after 12 months it will be called long term capital gain/loss.

But on both long and short terms, you have to pay taxes. Hence, it is important to figure out what the taxation will be on your particular shares before selling them. The charges involved can be significant.

The stock market for beginners who are not well versed with its working will seem a whole different scenario. Hence, not knowing important things about the stock market can bring unwanted inconvenience to you.

Trading in the stock market is something everyone must have heard of. But many people, especially the beginners, do not have a clear idea about certain things concerned with the stock market. Hence, it becomes important to throw light on the most important things which beginners do not or may not know about the stock market. Moreover, having a brief idea becomes extremely important for those newbies and they must check out the stock market for beginners guide.

The stock market refers to a place where stocks or shares are issued, bought and sold. A share refers to a unit measurement of a company’s ownership and also serves as the documentary evidence of the same. The number of shares you hold signifies the part of ownership you have in the company. This brief definition of the stock market for beginners should be more than sufficient.

Stock Market Trading For Beginners

Now that you have got some idea regarding the stock market, it is time to move on to the things you must know about trading in it. This is important to know because the stock market for beginners can turn out to be a different world and not knowing certain things might unhinge your plans.

1. Diversified Portfolio

Stock market for beginners seems quite promising as they can easily figure out which company is going on profit and hence is best to invest in. But do you know investing in a single company even if it is promising can put you in massive risk? Since the stock market is volatile and keeps fluctuating you can never know for sure what is the right time to invest. If the company you have faith in all of a sudden starts falling in their profit level margin and even faces loss, it should not come as a surprise.

The ideal thing to do here would be to diversify your investment portfolio. Invest in mutual funds and EFTs, if you can, so that one company’s failure will not affect your overall investment.

2. Over-diversified Portfolio

If diversifying your portfolio can help you cope better with the losses, then over-diversification can curb your profits as well. This is the reason where not just the beginners but even the experienced investors go wrong. If a company happens to profit say 60% in a year then the profit you can expect from it will not be much because you have few shares in it.

As there is no golden number for a specific number of shares which will yield high profits with marginal risk, you should prefer to play safely first. What this implies is that as a beginner you should be more cautious rather than adventurous. Stock market for beginners should first be a place of gradual growth than instant fall.

3. Penny Stocks

Beginners start investing with a small amount. So it is natural for them to want to get as many shares as possible. Cheap shares which can be easily bought in large numbers are called the penny stocks. Penny stocks have a much lower chance of doing better than the normal stocks for they are often issued by companies who are starting up and looking for capital or companies facing loss. Hence, their probability of success is not as competitive as one would want them to be.

Therefore, buying a large number of shares in the stock market may be easy but the important thing is to keep in mind their competitive quality in the ever-fluctuating market.

4. Rapid Trading

Stock market for beginners teems with new opportunities every day. New companies show up every day promising lucrative returns on investment. This makes many investors jump ship from one company to another. But the unpredictability of the market never keeps the same graph of profit or loss. The company which is soaring today can fall just as steeply tomorrow.

The unpredictability of the stock market makes it impossible to ascertain the performance of a company.

The prudent thing to do here is to keep faith in the company you have first decided to invest in. Stocks take time to grow. Expecting that a more promising venture will provide you with better returns does not always hold. But if you have invested for a considerable time in a particular company, there are better chances of you getting a handsome return.

5. Taxation

Selling your shares can give you short or long term capital gain or loss. But do you know it is also taxable? If you sell your shares within 12 months of the purchase then depending on whether it is sold on profit or loss it will be called short term capital gain/loss. Whereas if the shares are sold after 12 months it will be called long term capital gain/loss.

But on both long and short terms, you have to pay taxes. Hence, it is important to figure out what the taxation will be on your particular shares before selling them. The charges involved can be significant.

The stock market for beginners who are not well versed with its working will seem a whole different scenario. Hence, not knowing important things about the stock market can bring unwanted inconvenience to you.