The market always grows, that was the point among others that I was trying to drive across in the latest article where I talked about why this is the right time to start investing in the stock market, if you didn’t happen across it here it is – Why you must start investing in the stock market today! Now despite all the reasons and excitement, investing is not something you can do right out of the box. There are certain steps and methods that will help you reach your mark as we shall talk about, now.
If the last article got you pumped up and excited you should hold your horses for a minute at this stage. Now it is no wonder that one single article is not enough to learn everything there is about the stock market, nor is a single course. Yes, it is easy to post the link of an online course on the issue and be done with it. However, the ground reality is that the quest for education especially in something as diverse and expansive as the capital market requires dedicated and committed research by the learner.
Obviously, everyone needs a guide to get started with. To that extent I urge you to go through this article which enlists top 10 books every investor should read. In the books department I personally recommend “Wealth of Nations – Adam Smith“, let me explain why.
It is important for any professional to have knowledge of their niche from the grounds up. Too often we venture into domains with just the surface knowledge. That is almost always a severe detriment to our understanding and proficiency in the domain. Adam Smith expertly laid down the foundation of modern economy which is invariably linked to the capital market of today.
If however reading is not your forte, you can check out on YouTube channels like Elearn Markets whose founder interestingly is also the brains behind the most popular stock analysis app in India – Stockedge. Along with building your foundation, it is also important for you to take an open approach when it comes to learning about the stock market. One important aspect to take note of happens to be human psychology. After all it’s people who trade on the market it is important to understand how they think before making a decision. I have found Sunil Miglani’s YouTube channel to be a wonderful place to learn more about this specific issues, highly recommended.
If however, you are someone who greatly benefits from a structured course, there is a large collection of open course wares that take the approach seriously and using which you can learn a lot. Coursera can help you not only understand the concepts in detail but also help you out with a certificate that will be useful in case you want to have a career in this domain, plus it’s free if you want to simple learn and audit the course.
Pilots and astronauts train for days and months at end on simulators to hone their piloting skills. If you have to pilot your capital to success in the wild mess of the stock market you must sharpen your skills and put your learning to practice first. Now granted, it is really infeasible to invest your own capital at this time.
What if you make some mistakes and incur a loss?
Thanks to the Internet however you don’t have to lose money. There exists stock market simulators which operate via feeding real time market data to the user who has free virtual currency to start off with. From my experience and the plethora of these apps which I have tried before writing this article, a good stock market simulator is one which essentially offers the opportunity to learn and master finance and investing basics.
Key concepts such as factoring for trading costs, sell short, and performing stock analytics using various financial ratios such as price:earning, debt:equity, to name a few must be given heavy focus. Along with all that, the simulator must incorporate ways to show business related news that can affect market performance.
So, after careful deliberation I have come up with these three options each with their unique perks and flaws.
- Wall Street Survivor
WSS is one of the oldest stock market simulator which incorporates a lot of personal finance and investment knowledge which are periodically updated in accordance with market requirements. The options here are truly limitless. The community is huge with more than a million people participating in their games which coupled with their competitive and interactive game play style gives the user an unique platform to not only practice investments, but to continually learn and even earn rewards.
However, this simulator I found is very expansive and takes a lot of time to master properly. So, take a shot at this only if you have a lot of time on your hand.
- Investopedia Stock Simulator
If you have ever Googled anything that concerns financial issues or business related aspect, you have likely stumbled upon Investopedia. It is the authority when it comes to finance and business. So when they came out with their stock simulator, I was instantly hooked.
The first feature which caught my attention was the $ 100,000 virtual cash you get right out of the box. As with the previous option, I place a lot o`f focus on the community aspect of such platforms as that is the best place to learn from your mistakes and understand existing problems and strategies. Investopedia boasts of a community more than 700,00 strong. Not only that, from my experience I have found that the community is incredible diverse. The perks of a diverse community is that you get to learn about the market with a global approach. Understanding the international market can be a huge bonus and help you in more ways than one to boost your portfolio.
As much as I love the implementation of this wonderful concept from Investopedia one caveat is the 15 minute lag in trade execution. Though it does not in any way impair one’s learning ability but it is something to look out for if you are interested in day trading for example.
- IQ Option Demo Account
This simulator will give you a very specialised trading skill. Binary options as the name somewhat suggests and as defined by investopedia, is a financial product where the buyer receives a payout or loses their investment, based on if the option expires in the money. In essence, the instrument depends on the outcome of a “yes or no” variable proposition which expire at a given time. When said expiry time comes, the trader’s prediction must be on the correct side of the strike/market price.
To illustrate, suppose stock ‘x’ is currently trading at $ 64.75 currently. A binary option has a strike price of $65 which expires tomorrow at 12 p.m. The trader can buy this option for as low as $ 40 and if the price of the stock expires at any price above $65, the option expires in money and is now worth $ 100. The trader makes a total of $ 60 in the entire transaction. Similarly, if the option expires at a price lower than the said $ 65 then there’s a loss of $ 40.
Now, this requires an immense intuitive development to get right. What I loved about this app was the integrated news feed system which is very important for any type of trading and doubly so when it comes to binary tradings. The demo account contains a balance of $ 10,000 in virtual currency which is replenished when exhausted thus allowing the user to practice for as long as they desire.
The interface is well laid out and easy to understand, it is one of the best mobile trading platform I have seen. The multitude of asset classes is also a definite plus, from crypto to future contracts and even forex. The options are limitless. This is also the first mobile app I tested which has a
plethora of tools one can use to make trades happen.
All things considered, IQ options is a truly powerful simulator which is a must for anyone who wants to try their hands at the binary options game. Not only that, if you want to learn about forex and CFDs it is a great tool to do so without any invasive adverts or obstructions. Do check out the android/iOS application here.
Choose Your Broker Wisely
Now that you have learnt about the market and understand it well, it’s time to put your learning and training into practice by actually getting to trade in the real market. This is arguably the most important step which you must give the most careful and insightful deliberation to. So, your choice in selecting your broker will definitely be dependant on your needs and expectations from the market. Every broker is different and serves a different purpose.
The two types of brokers that exist in the market today are – a) Full-Service Brokers, & b) Discount Brokers. Let’s take a deeper look into each.
- Traditional/Full-Service Brokers
As the name suggests, these are the old players in the game. They are the ones with high street physical offices and a more personalised service experience. That being said, it is not something you should reject.
It does serve a specific niche of customers. Maybe you have a lot of wealth to manage or you simply don’t have enough time or anyhow are not willing to spend as much energy on stock markets. That is the type of customer these firms look to service. Now, all those services don’t come cheap. Let’s look at this chart courtesy of investyogi which enlists the costs associated with some of these brokers.
Now I will not spend a lot of time explaining about their quirks and features. They do have a robust relationship management system and a simple call will be enough for them to explain everything and more. Moving on to the more relevant method of trading, we have –
- Discount Brokers
These are the relatively new players in the market. Proliferation of the internet and smartphones have opened up newer avenues for innovation and development. One such innovation was the advent on instant online trading. Lets take a look at our top pick and what makes them special.Zerodha
It is India’s largest and most popular stock broker platform. With flat free discount brokerage service to invest and trade in Equity, Currency, Commodity, IPO, and Direct Mutual Funds. Among the features, we loved the fact that you get most trades for free and those you don’t are typically flat 20 INR or 0.03% whichever is lower.
Another often overlooked features which is incredibly important especially in this day and age of volatile market condition, Zerodha does not keep client securities in pooled accounts and refrains from proprietary trading.
Zerodha Kite & Coin are two of the most impressive trading platforms in the market currently. Not only that, Zerodha has you covered for almost all your needs from thematic investment, algorithmic trading, options trading, bonds, and mutual funds to name a few.
With the best rates and unparalleled service record, it is no wonder that the safest bet in this regard is the most popular one. After all, 12 + lakh active clients cannot be wrong.
So, should you go out and start trading today or wait to see how the market goes. Well, I am not in a position to give financial advice but what I personally do to multiply my wealth is that I go after SIPs or systematic investment plans. Quite simply, no one can predict the market so it is better that you remove the whole emotional aspect from the game and invest regardless of the situation in periodic intervals. Thus, your wealth continues its growth no matter what. Holding long is the name of the game and patience is of immense virtue.
With all that being said, I will urge each and every one of you to take a deeper look into the options I listed and let me know in the comments what your plans are when it comes to investing in the stock market for the second half of 2020.