In the previous post, I discussed the first four questions. If you haven't seen it yet, please check out that post by clicking the link. In this post, I will discuss the final four questions. Let's get started.
Part 1: Stock Market For Beginners. How Can Beginners Start Investing.
Fifth question: If everything is so good, then why is the share market's name so bad? Why do people fear it? Can I tell you a simple reason this is a mindset problem. When we buy a property, does anyone think in 4 days the price will be doubled and I will sell it. When someone buys gold, they pass it on for generations but never sell it. No one thinks that; let’s buy it today, and then after one month when the price increases, I will sell it. So we give property the time to increase; we give gold the time to increase.
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But if your friends tell you to come to the share market, they will say this too: that they made Rs 40,000 in one day and doubled their money in 2 months. Which means their expectations are wrong; they come here thinking that the new people who come and I just have to become rich overnight. You can either become rich overnight by lottery or gamble somewhere, and if you are lucky, then it can happen. So you play the share market as a gamble. For the company that you are becoming an owner of and buying a share of, who is the manager? What is their business model? Not finding out about that, I just read a chart and heard from someone and bought the shares. Then you will obviously make a loss.
So like that, in the rush of making money, people buy Rs-1 and Rs-2 penny stocks, and there is no front or back to that company. Thinking of that, if 1 becomes 2, then money doubles. But that 1 to 2 never happens, because the company is not worth it. So the most important thing is, when you are coming into this market, don’t think this market will make you rich overnight. Like I said in a previous post, a return between 18% to 20% should be expected; if more, then it’s a bonus. Which means if you get an 18% to 20% return, then your money will be doubled every 4 years. Which, if we compare to Bank FD’s then in Bank FDs, it takes 10-11 years to double the money according to today’s interest rates. So compared to that, this market offers 3x times more. Which is enough. Don’t be greedier than this.
Sixth question: Now that you have learned engineering or arts but haven’t learned commerce, can you enter the share market? Shall I give you the good news? Yes, you can? Which is your stream or education background? That doesn’t matter. If you don’t know commerce, no problem. Welcome to the share market.
Seventh, now I am going to discuss the two most interesting parts of this post. Why do share prices go up and down every day? How can you predict when prices increase and when they decrease and why companies are listed in the share market? Now see, if you want to start a business if you need little money, then family members, relatives, and friends will give it to you. If you need some more money, then the bank will give it to you.
But you need Rs 20,000 crore. Now a bank won’t give you that, nor will friends or relatives. Unless you are from the Ambani family, which many of us aren’t. So in this case, who will give you this much money? The public will give you this money. This means you will tell people your business model: that this is my plan, and I’m going to make this factory and make this car, a luxury car; it will run on electricity and run on water. But I need money. Now those who trust you will give you money in return. You will get partisanship from them in your company because they have put money in you, so you give them partisanship in your company. That partisanship will be called Shares.
You took the money and gave shares to those people. Now, this is when companies took money from you and gave you shares. This can happen: you receive a share today, and after 2 days you need money and want to sell those shares. The company will not buy those shares from you because they need the money, and they started building the car factory with that money; now they don’t have money to give you. So there should be a market where you can give that share to someone else. We call that market the Share Market. Where you can take shares from 4000 companies anytime and give back anytime.
If you think that Colgate is going to do well, their toothpaste and toothbrush are selling more. Then anytime you can take their share from someone else through the stock market. If someone thinks Colgate is going to do badly, Patanjali will give more competition so they can sell the shares. Because millions of people every day are buying and selling a share in the share market. That’s why you will always find a buyer or seller for your shares, most of the time. That’s the importance of the share market. Just think if you want, you can be a part of Ratan Tata’s business by buying a share with one click. If you want, you can buy Adi Godrej's Godrej empire shares. If you want, you can be a partner of Jio, buying shares with one click. You can buy just 1 share. For just Rs 1500, at least you became a partner of Jio and can say proudly that Jio is mine. Is everything clear?
Now let’s discuss the last part. What are those books and sources where you can learn investing from home? Apart from that, there are many books. One book is INVESTONOMY. Other than that, what are my favorite books? RICH DAD POOR DAD is a good book for starting. After that is LEARN TO EARN by Peter Lynch. No other book can't tell stock market basics better than this. After that little advanced level, but a very, very quality book, THE EDUCATION OF A VALUE INVESTOR, by Guy Spier. Now I know that you are feeling a little confident despite that; it’s very scary buying that first share.
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