Hey, today we will discuss “How to get rich by investing in Stock Market”. This can be a very fundamental issue for many. But I strongly believe it’s high time we all revised the fundamentals, too. And for newcomers, there is one common question for all those who are new to the share market, or who are willing to enter the stock market, is HOW TO INVEST IN SHARE MARKET?
So, here it goes,
I hope that some of you have explored the stock market and there are plenty of expectations here to learn about it. Now, let’s take a closer look at the average guy. These first moves explain these fundamental doubts on the stock market and reinforce the foundation.
Below are the different ways that people assume that someone makes money in the stock market:
• Being highly fortunate in the stock market
• By hearing advice. Someone has given you the tips to buy the specific stock.
(You purchased for a low price and sold for a higher price, so you have a lot of income)
• By doing hell lots of intraday trading in the stock market.
(It is not true that by trading throughout the day, you become millionaire).
• Make money through the identification and investments of good companies.
As we know, businesses can succeed, and they can fail too; it may succeed at any rate we can’t imagine.
Let’s take an example, A company that got started for just one million dollars can become a billion dollars’ worth company or a ten billion worth company with the time.
Wondering how this happen?
• This is because they were catering people in a large market size.
• Their goods and services have become so much in demand that so many customers have been available for them.
• They continued to expand at a rapid pace that the investors made enormous money in it.
Now let us learn more with a better example.
Everyone knows that FD will give us 6 percent a year, so it will become enormous money after 10 to 20 years if you continue to invest in FD for long. What if I say, however, that 40 percent per year can grow the same money? It’s unthinkable, the first thing that comes into your mind! Where is the rise in money at 40% a year, no way!
Now I would like you to search the answer for the following question using a compound interest calculator in Google.
Suppose you have invested 1 lakh rupees in the stock market for 10 years at a 40% interest rate. Are you shocked by the resulting amount?
Okay, let me break the ice, your one lakh now has 28 lakhs. This is called the magic of compounding. The more interest your money gets, the faster and larger your balance will expand. As your account adds interest, you receive interest on the original balance plus the previous interest gained. The annual percentage yield is the last return on your investment.
I believe, most people make money on the stock market because they have long been invested in a very good business. In general, stockbrokers and tip sellers have a view on the stock market that you continue to buy and sell, and that you will make money.
People are afraid that you can’t make a long-term investment or value investment with very little capital in the stock market. Even a small amount of 10,000 rupees invested in good businesses, with the power to compound, can turn into huge money.
How people make money in the stock market?
They invest in strong business enterprises. In terms of revenue and earnings, the company is rising, and its share prices are increasing.
Concept of Reinvest
Till here, hopes it’s evident. Now we all know that businesses make profits, and they must grow if they have to rise at the compound pace. They reinvest their earnings for this reason.
Companies in a growth phase will continue to reinvest their profits to further expand the company. They will probably not allocate income to their shareholders during this time. If so, the business will grow more rapidly, and this growth will lead to an appreciation of the stock price which in turn increases your invested cash.
Let’s think of another situation now.
Suppose the business has reasonably expanded and they make immense profits. There are then no ways they can reinvest these profits in their own company. They then divide it equally between their owners.
Now think that 100cores of profit have been won. They want 50 crores reinvested, 30 crores on the balance sheet are maintained and 20 crores divided amongst their shareholders.
The benefit distribution depends entirely on how the organisation operates. Many companies have made excellent dividends, but they have limited scope of expansion.
In certain situations, the firms reinvest their entire growth earnings,
In others, only part of the profit is reinvested and investors earn rest
In some other situations, all the gains are allocated to the investors.
This method of investment in respectable firms is therefore continued by some people. Per shareholder is granted a dividend from the company’s earnings.
The question now arises, “How can successful businesses be found that perform well?”
Well, this method is known as fundamental analysis. We shall be covering it in another blog.
Many of us already work in one sector or the other, and in this specific sector, we know what works. We should also continue to explore other industries in the same way. You can never lose hope; by applying these qualitative and quantitative analytical concepts, it is not difficult to find good companies. It’s easy to read, indeed. In the fundamental analysis blog, we will analyze in-depth. I’d say that someone without any previous experience will learn it and recognize good stocks alone.
I’d like to assume that 95% of the money moves through a quantitative analysis whether you are here as a trader or someone who wants to make a career in the trade. It has turned into a popular subject, which prefers that in the retail sector. I’m not saying you can’t earn trading money in the stock market, many of them did it already. I just say that you shouldn’t trade if you’re doing something already and don’t have time enough. You should actively or passively invest in the stock market and expect your investment to grow at a good pace.
It’s all about business with a good success rate. Most of the positive people out there who are doing the right business will be successful and they may grow at any rate any day. You just need to find these best businesses, invest in them, and stay calm.
Always remember “Know what you own, and know why you own it”– Peter Lynch
Till then, happy investing!