A place where money works for you- Stock market.

I love people. I enjoy encouraging them and helping them grow. Since the COVID-19 outbreak, I have grown to realize just how much I can learn and work over my skills and passion. Everyone should try something different as I did.

Before starting my today's topic let me clear you something about market and investment..


What do you think of when you hear the word “the market”? Sometimes it can feel like the market is just a flow of money bouncing up and down without reason. But the market is, of course, much more complex than that. 

Markets, in general, are places where two or more parties can come together to exchange goods or services. There are many different types of markets but the one most applicable to this question is the financial market, which is a place where any security is traded. 

The financial market consists of varying parts – like the stock market, exchanges, bond market, and foreign exchange markets.

Let's begin on the topic-

Stock market
In a lemon terms
Stock market is the place where we can buy or sell shares of a particular company.

Stock market works only between two parties which are buyers and sellers. The whole transaction or trade happen only between buyers and sellers and it's really easy to understand, If one get loss then another get profit.
But the problem is how a normal individual can buy or sell shares of a company who is working with billions of billions dollar capital.
That's why stock market works with a channel which have 4 bodies
1 - Company
2 - Exchange
3 - Broking Firms
4 - A Individual Person

Companies - A company is a legal entity formed by a group of individuals to engage in and operate a business. And to operate a business they need big capital and that's why the are issues shares.

Exchange - Exchanges are the places where a buyers and sellers meets to trade.
Like - NSE, BSE, MCX

Broking firms - Broking firms are the bodies who helps you to reach to the exchanges. Because not a individual person directly deal with exchange.

A Individual - A Individual is a person or a group of persons who wants to buy or sell any shares of any company.

*These 4 bodies are operating whole stock market.

Now we got the channel of Stock market
Let's start how a individual or group of individuals invest or deal in stock market directly.

First A individual need to select a good broker. Broker provide you a platform (A DEMAT ACCOUNT) which helps you to connect with the exchange. Once your DEMAT Account is ready then you can watch stock market perfectly.

Once you start watching market you will get some idea about shares and the price of shares etc. Then you can take decision to take a trade and invest directly in stock market without investing in mutual funds, SIP or any these financial products. Because they also invest in the stock market no other places are exist in the world.
Your all money which you invest anywhere it will come in stock market only directly or indirectly. So why not we invest directly and get all profit.
Broker is a middleman so they provide the service and charge the money for that which called brokerage.
When you take your decision to take any trade you just have to give a order to your broker and broker will do exactly what you say to do. Means broker buy or sell shares according to your order.
Now, how the broker do my task ?
Here, the broker will go to the exchange and your task will complete in exchange only.

Example.... There are two individuals Mr. A and Mr. B, who are interested to trade in stock market.
Both are watching shares
Mr. A decided to Buy 100 shares of SBI BANK
And Mr. B decided to Sell 100 share of SBI BANK.
both give order to the their brokers, broker will pass the order to the exchange, because all the broker connect with the exchange only. And exchange complete the total task.


Reason why we indian should invest in stocks. 

1.This is really a harsh reality that we Indians are invested in Stock Market near about (2 - 2.5)%. Currently, the population of India is around 1.2 - 1.4 Billion, out of which only 20 - 28 million people invest in shares and mutual funds. #google current data..

2.One of the primary benefits of investing in the stock market is the chance to grow your money. Over time, the stock market tends to rise in value, though the prices of individual stocks rise .

As I mentioned in my last blog 'Rich dont work for money ' money work for them. This is the only technique by which your money can work for you!!

3. As we all know due to corona outbreak all the businesses has been lockdown and more than 50% people had loss their jobs and they dont have any source of income but the investors of stock market are still earning.

4. Investments are important because in today’s world, just earning money is not enough. You work hard for the money you earn (active income). But that may not be adequate for you to lead a comfortable lifestyle or fulfill your dreams and goals. To do that, you need to make your money work hard for you as well. This is why you invest.


Why do Indian youngsters do not invest in share market?

Now, according to the non-investing population, the two biggest reasons that stop them from investing are ‘lack of education’ and ‘lack of time’.

For the first part i.e. the lack of education, it might be a little fault of our education system, somewhat of the parents but most of the individuals. Investing is not a rocket-science that only people with high-IQ can pursue. Anyone can learn and start investing. People should not always blame others if they are not ready to learn. There are a lot of free resources available online and offline, which is enough to get adequate investing knowledge.

Anyways, the other common excuse that most people make for not investing is that they don’t have enough time to invest. “No time to research where to invest!”. A few may even argue that setting up a trading account and making investments takes a lot of time which prevents them from investing.

However, all these are just excuses!!

After reading this the biggest question arise in everyone mind I.e

How do I invest money in the stock market?

First of all, everyone knows it game of long term so you will have always best return on longer run as compare to short time period. Buy and hold strategies work too good on blue chips company and midcap firm which have high probability or good earnings growth. In this kind of company your you might be getting return in terms of multiple.
Investing in stock market can make people rich and it can make you poor also. Stock market is like Ocean. It looks beautiful and it’s scary too. As you know we have to learn everything before entering into the Ocean, here also you have to learn everything before investing. If you are not aware about the risk involved and you don’t have sufficient knowledge, you may loose your entire capital. If you want to be rich or wealthy from stock market, you have to learn how to earn. If you are not earning after learning, you have to change the way you think and you have to improvise yourself.

There are 2 major ways in Indian stock market which makes us rich.

1.Investment

2.Trading.


Investment: Investment in stock market for long term can make you rich. It requires large capital to be invested as well as time frame. Getting rich with investment needs patience. Impatient people can’t get money through investment.Suppose you have invested in metals like Tata steel, JSW Steel, Hindalco, VEDL when they were at 52 week low before 2 years, you must be getting 100% to 500% returns in 2 years. But it requires patience.

Trading: Trading is what we do for short term which involves risk but also generate large profit if you have talent to use momentum of market.



Closing Thoughts

1.Stop excusing that you do have spare time to invest, instead start acting. Everyone has the same 24 hours in a day. If you are not investing, it’s not because you don’t have time. It’s because you do not understand the importance of investing.
2. Everyone wants to earn, but nobody wants to learn,  how to earn.

3.Choose investments carefully after doing adequate research .

4.Dont invest in the business you dont understand says MR. WARREN BUFFETT. 

The Choice is yours: Assets or Liabilities?

Before starting my today's topic, I would like to tell you the real meaning of assets and liabilities and what mistake we students mostly do.

Last week I took a survey of my 5 friends. I asked all of them the same questions: The question was "What is an asset " and "What is a liability?"
All of them came up with the same answer which was "Assets means property and liabilities mean debts."
However, it is correct theoritically but not practically.
According to me, an asset is something that makes you money or anything which gives you cash flow.
Whereas a liability is something which costs you money and outcome of your cash flow.

To make it more clear, let me provide you all with a simple yet explanatory example.
There are two boys and both of them receive their respective pocket money. The first boy buys an iphone and starts showing off and he thinks that his phone is asset for him but as I told you earlier, assets means the things that makes you or gives you cash flow but by buying the phone he did expense.
On the other hand, the second boy decides to invest that money in stocks and purchase an iphone with the cash flow of that investment, which is the real asset of that boy.
If the rich do not work for money, then what do they work for?
Before stating the fact that the rich do not work for money, we should understand the true and actual meaning of working for money.
Simply, working for money is getting paid for time and work directly. It means if you are working, then you get paid as salary .
It is called Trading time for money .
Trading for money is just like working for money as active income.
Example - if we work for an hour we get paid for an hour.
And more than 95% people in India work like this.

And rich people do not work for active income they build assets and cash flow from assets is their income.
This is why rich people first focus on creating assets which can give them passive income.

5 types of asset of rich people are:

1. Small or big systematic business

2. Real estate (focused on rental income)

3. Paper asset (stock, bonds)

4. Commodity assets (gold, Silver)

5. Intellectual assets ( copyright, patent)

Many of us think that our property is our asset which is totally wrong , according to me our house is also a liability for us because it also increases your expenses and the
outcome of money .
But your house can be converted into an asset, if you give your house on rent by which you will get earning /cash flow and your house/ asset will make money for you.
If you want to be a real rich person, then you must apply this secret and create/build asset which will give you passive cash flow income.

Note:  The Choice is yours: Assets or Liabilities?

Motivation:

1. Focus on learning not earning.
2. The truth is that real rich are those only who have passive and portfolio income more than doublethan their lifestyle expenses.
3. Try to find the difference between the real asset and liability.
4. You become what you study - read alot...