I want to start investing small amounts in stock markets. What is the best way to start?Asked
There are lots of ways through which you can invest in the equity market. However, as a novice, the best and the safest option would be to invest through Mutual Funds.
As you may be aware, equity markets are highly volatile and the prices fluctuate every minute. An uninformed decision can cost you your hard earned money. By investing in mutual funds, you are mitigating this risk because a fund house invests this corpus in multiple securities across different asset classes thereby effectively diversifying your portfolio. Such diversification allows the investor to seek maximum returns at minimum risk. By investing equity securities, the fund manager allows you to benefit through capital appreciation and by simultaneously investing in debt instruments, he allows you to hedge the risk of investing in equity market and earn regular income.
Investing through mutual funds not only allows you to invest in equity markets, it allows you to do so through a skilled and experienced manager, who is at a better position to do fundamental and technical analysis and then take investment decision. You can also analyze the past performance of the fund house as well as the manager, and though it is not a guarantee of future returns, it can help you evaluate your options.
By investing in mutual funds, you are also not required to actively manage your portfolio and continuously monitor the market, as your fund manager will do it for you. This route is ideal if you are looking to learn how to invest in stock markets.
Also, mutual funds are one of the few investment tools that let you invest a sum that suits your pocket. You can start by investing as little as ₹500 each month and it can go as high as you want. Investing in a Systematic Investment Plan (SIP) also helps inculcate financial disclipline, which is imperative in today's world. Investing in mutual funds is also very convenient, as you do not need to open a demat account for the same, unlike investing in equity directly. For a more detailed guide on how to start investing, read this very helpful article.
You can check out various mutual fund options that meet your objective here. You can also contact Groww for further guidance.
Investing in stock markets requires proper knowledge of how capital markets work, trends, latest happenings etc. And therefore in the beginning stage it is better to start investing in equity or balanced mutual funds as mutual funds are very well regulated, professionally managed, easy to manage and cater to your investment objectives and also provide any time exit opportunity.
Since you are interested in stock markets you can select any 5 or 4 star rated mutual fund in the large cap or diversified equity category from our website (from the links provided below) and invest in the fund by simply clicking on the preferred mutual fund. Not only this you can read more details about that fund like past year returns, portfolio holdings, risk type, fund manager of the scheme, inception date, expense ratio etc.
You can either invest a lump sum amount in a mutual fund or invest via the SIP route in these funds. In the SIP method, a fixed amount of money will be invested every month on a particular date every month at the rate of that day’s NAV. SIP helps in dividing your investment over a period of time and helps to average out the purchase price in the long run.
To read more about basics of mutual fund please click here
To read more about how to select mutual funds please click here
Some of the top performers in the large cap category, that you may look at are: