The Nifty index of the NSE is a portfolio of top 50 shares in terms of market capitalisation. With the shares spread across several industrial sectors, investing in Nifty is one of the best ways to invest in the stock market. Read this post to know some of the most important things a beginner should know before investing in Nifty.
The NSE or National Stock Exchange is the largest Indian bourse in terms of turnover. While the exchange has several indexes, Nifty is the most popular. It is a portfolio of 50 of the largest shares in terms of market capitalisation. As the companies listed on Nifty are from all the different industrial sectors, the index is one of the best ways to start investing in the stock market.
But for a beginner, the decision to invest in the stock market is often full of doubts and fears. After all, the stock exchange is well-known for its volatility. But one can avoid or at least considerably reduce the risks of investing in Nifty by knowing a few important tips about investing. Here is a list of 5 important things that can help you begin your investment journey-
- Understanding How Nifty Works
Before jumping into the stock market, it is integral first to understand how the stock market works. You should try to understand what an index means, how are they calculated, how the price of each share in the index affects its calculation, etc. before investing.
The internet is now full of all the help and advice you’d need to begin your investment journey. So, spend some time on first educating yourself before taking the leap.
- Know Your Investment Goal
A lot of times your conversations with friends, colleagues, or relatives turn towards the stock market. You’ll often come across people who’ll tell you how the stock market or Nifty are the best ways to generate handsome profits. After hearing all of the fantastic things that someone has to say about investing in the stock market, you too might be excited to start investing.
While every investor wants to earn profits, any investment without a solid goal is incomplete and significantly risky too. You should always consider your financial goals before investing in Nifty.
- Select the Investment Option
Once you’ll start to understand Nifty and how it works, you’ll also get to know the different ways in which you can invest in the index. You can invest in the Nifty index through the derivatives contract or simply spot trade the shares listed on the exchange.
As compared to spot trading, trading the derivatives contracts such as future and option contracts are generally considered to be riskier and require more knowledge and experience. So, try to get some experience with spot trading before experimenting with Nifty derivatives.
- Intraday or Long-Term?
You can buy and sell Nifty contracts or the stocks listed on it within a single day or hold your investment until the contract expiry or for long-term in case of direct purchases. Buying and selling on the same day is known as intraday trading, and positions held for long-term are known as long-term investments.
Similarly, some people prefer BTST (Buy-Today-Sell-Tomorrow), short-term investments, and medium-term investments. Select the type of trader or investor you want to be by carefully examining your risk appetite and financial goals.
- Avoid Timing the Market
A large number of new Nifty 50 investors end up losing money when they try to time the market. No matter how experienced an investor is, it is almost impossible to time the market consistently. So, rather than timing the market, focus on creating a disciplined investment strategy.
Be patient, avoid the herd mentality, and focus on your research and analysis before placing any buy or sell order.
There is no denying the fact that the stock market is full of great opportunities. But as someone who is new to Nifty or the Indian stock market, it is essential to avoid the common pitfalls to not lose your hard earned money. Focus on the points discussed above and start with a small amount to avoid any major setbacks.
Learn from your mistakes and use the resources available on the internet to turn yourself into a smart and savvy investor.