Progression to Wealth - Slide

Wealth creation is a gradual process

Steps to Invest in the Indian Stock Market

Historically stock market investments have rewarded investors with significant returns over long periods of time. Still, awareness about benefits of investing in stocks is poor in India. People are piqued by questions like how to invest money, how to invest in stocks, how to invest in share market, what are the best stocks to buy, so on so forth.  In order to address such question this article provides the steps to invest in the Indian stock market.

Step 1:

First and foremost is learn investing. Without sound investing knowledge people may face unnecessary pitfalls and may get disheartened early in their investing careers. Please read the book “Intelligent Investor - The Investors' Bible” by Benjamin Graham.

Please also learn value investing for FREE in the blog here.

Step 2

Using a kotak stock filter, “Kotak Securities” which appear as follows:

Using two parameters ‘market cap’ between ‘1000 to 99999 crores’ and ‘PE Ratio’ between 1 and 10, filter the stock. It should yield you about 100 stocks for further study. You must study carefully past 10 - 15 years’ profitability ratios, solvency ratios, liquidity ratios, dividend track record, etc. Please note this is an indicative list of items.

The stocks listed in  “Portfolio 2K15” is the final list of Indian Shares I have deemed fit for investing. The list is only for educational purposes. One cannot blindly invest in the scrips mentioned there - one has to calculate the intrinsic value of stocks and pay only the lowest  best stock prices below their intrinsic value.

Step 3

Open a ‘Trading’ account with a stock broker and a ‘Demat’ account with a stock depositary account (DP Account). You should link an existing bank account or open a fresh bank account with the DP Account for the automatic crediting of dividends. Your stock broker will assist you in this. I use ‘Kotak Securities’ as my stock broker. ‘Zerodha’ offers minimal charges.

Mutual Funds/ Exchange Traded Funds

If you think learning stock investing very tedious, you may invest in 'Mutual Funds' or  ‘Exchange Traded Funds (ETFs), which are a type of mutual fund which mirrors popular indices like NIFTY 50, for which you have to undergo the procedure in Step 3, but instead of buying the share of a company you choose the ETF. Goldman Sachs NIFTY BEES and Goldman Sachs Junior NIFTY BEES are what I have invested in and shown in ‘Portfolio 2K15’. The advantage of ETFs is that fund management charges are very low at about less than 0.50% per annum.

Alternatively, you may choose normal mutual funds. I find the fund management charges are high.

Suggested Further Reading:

• Miracle of Compounding
• Risk Comes from Not Knowing What You are Doing
• Margin of Safety
• You Only Find Out Who is Swimming Naked When The Tide Goes Out
• How to Find The Fair Price of A Stock?

Conclusion

Investments in best stocks will no doubt produce enduring wealth. There is absolutely no need for investors to be hassled by questions like how to invest money, how to invest in stocks, how to invest in share market, what are the best stocks to buy, and so on. Steps to invest in the Indian stock market have been deliberated in detail above offering guidance to identify the best stock to buy at the best stock prices.