How to Invest in Stock Market in India?

When I first started on my journey into the world of investing, I had little more than enthusiasm and a somewhat childish optimism about the stock market.

Like many in their early twenties, I was filled with dreams of financial freedom but lacked the practical knowledge to turn those dreams into reality.

I may not be able to build and empire like the TATAs but I can be their partner.

I wish I knew this earlier but here is the steps one shouls follow before invsting in the stock market.

Step 1: Clearing the Debt

The first realization hit me like a ton of bricks: debt was my biggest obstacle. I had accumulated credit card debt, a personal loan, and an education loan. The interest rates were nibbling away at my future earnings. Here’s what I did:

  • Credit Card Debt: I tackled this first due to its high interest. I used the snowball method, paying off the smallest balances first to gain momentum.

  • Personal and Education Loans: These were next. I consolidated my loans where possible to reduce the number of payments and interest rates. Every extra rupee I could find went towards these debts.

The sense of relief and freedom that comes from clearing all your debts is truly invaluable.

This phase was tough. It meant cutting back on all non-essential expenses, which included no more fancy dinners, no new gadgets, and even moving back with my parents to save on rent. But the relief of seeing those debts disappear was unparalleled.

Step 2: Building an Emergency Fund

With the debts behind me, I turned my attention to creating a safety net. An emergency fund is non-negotiable in the world of personal finance. Here’s how I approached it:

  • 6 Months Expenses: I calculated my average monthly expenses, which included everything from groceries to transport, and aimed to save six months’ worth. This took about a year, during which I was very frugal.

  • Savings Account: I kept this fund in a high-interest savings account for easy access but also to gain a little interest over time.

This fund gave me peace of mind. Knowing I had a buffer against life’s unexpected events like job loss or medical emergencies was incredibly liberating.

You can also keep emergency funds in other places like Liquid Funds but make sure you can get it as cash within 2 days maximum.

Step 3: Securing Insurance

Insurance was the next logical step. Here’s what I did:

  • Term Life Insurance: I got a term insurance policy that would cover my family in case something happened to me. It was surprisingly affordable, and the peace of mind it offered was priceless.

  • Health Insurance: This was a bit more complex. I opted for a comprehensive plan which covered my immediate family. The premiums were average, but with rising medical costs, this was a necessity.

Step 4: Starting to Invest

With the groundwork laid, I finally ventured into investing:

investing in indian stock market diversification

  • Mutual Fund SIPs: I started with Systematic Investment Plans (SIPs) in mutual funds. Here’s why:

    • Diversification: Mutual funds spread the risk across various assets, which was perfect for someone like me, new to investing.

    • Small-Caps: Being young, I could afford to take more risk. I allocated a portion of my investment towards small-cap funds, which historically offer higher returns over the long term. Many of my small-cap funds have breached 100% returns!

  • Consistency Over Amount: Initially, I could only afford to invest a small amount each month. However, the key was consistency. Over time, as my income increased, so did my SIP amounts.

Use safer funds like Balanced Advantage Funds if you’re above 35 years of age.

zerodha invest in stock market

Step 5: Avoiding the Pitfalls of Day-Trading

The allure of day trading was strong, especially with stories of quick riches floating around. However, I learned:

  • Most People Lose Money: After attending a few workshops and reading up on it, the statistics were clear. Day trading isn’t for the uninitiated, and the majority end up losing money due to high transaction costs, emotional decisions, and market unpredictability.
  • Nirmala Sitaraman’s Intentions are Right: She has increased short-term capital gain. She also has increased securities transaction tax(STT) on options and futures thus driving more people away from this gambling.

Most companies make progress in the long-term.

I stuck to my long-term investment strategy, focusing on growth rather than short-term gains.

Step 6: Aiming for Financial Freedom

The dream of financial freedom seemed distant at first, but as my investments grew:

  • Reaching ₹1 Crore: This became my benchmark for financial independence. It took discipline, patience, and a bit of luck with market performance. By my early thirties, through consistent investments and compound interest, I was nearing this goal.

This was a big sum for me, but in the future it may look very small. Adjust your goal sum accordingly.

  • Retirement: With this capital, I could theoretically retire. However, ‘retirement’ for me meant having the freedom to choose how I spend my time, not stopping work altogether.

If your stock reaches an evaluation if 1 Crore, the next crores are easy. You reach multiple crores in shorter time.

Step 7: Pursuing Passions

With financial independence in sight:

  • No stress: When I was working, I used to bite my nails and lips. I used to do this when I was tensed. I noticed that I do not do these anymore. Also, I used to mukbang but now I eat like a cow(I mean slow). Any work I do, I can do it at my own pace knowing that I do not want anything out of it.

  • Following Heart’s Desires: I started to shift focus.I can take spend more time with my kids now. I also began volunteering more, which was deeply fulfilling.

  • Continued Investment: Even with financial freedom, I kept investing, now with a more relaxed approach, focusing on stability and dividend income rather than aggressive growth.

My journey into investing in India was not just about numbers and financial statements; it was about life changes, learning, and personal growth. From the grind of debt repayment to the thrill of seeing investments grow, each step taught me more about money, myself, and how to live life on my terms.

Investing isn’t just about making money; it’s about securing your future, gaining peace of mind, and ultimately, having the freedom to live life according to your own script.

If you’re at the beginning of your investment journey, remember, it’s a marathon, not a sprint.

The best time to invest is yesterday. The next best time is today.

Start with a solid foundation, stay educated, remain consistent, and most importantly, enjoy the journey. Here’s to your financial independence and a life filled with passion projects and personal fulfillment.

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