When a person starts investing in the stock market he has many questions in his mind regarding the functioning of the markets and its nuances.
One of these questions is “What is the minimum amount to invest in the stock market?”.This article will take a deep dive in order to answer this question.
Also, other questions like how much funds are ideal to start investing will also be answered in this article to increase your understanding of the subject.
1. What is The Minimum Money I Need to Start Stock trading in India?
The simple answer to this question is there is no minimum amount threshold to invest in the Indian stock market you can start investing with less than ₹10 by opening a Demat account and trading account.
In the Indian stock market, you don’t require thousands or lakhs of rupees to start investing or trading. There are many stocks that you can buy at a small amount before committing a big amount in the stock markets.
This minimum amount depends on the stock you want to buy for eg:- MRF Ltd. stock costs ₹77000 on the other side VI Ltd. share price trades for ₹10 in the market.
People usually think that a stock market is a place where mid or old-age people invest their saving for their retirement but that is not true I started investing when I was 18 years old with small savings in order to learn how the market works.
To learn more about the stock market you can read this best-selling book by Peter Lynch: One up on the wall street.(Amazon)
You can have multiply goals for investing in the markets like buying a home 10-15 years from now, going on an expensive foreign vacation with your family in your late 30’s or saving for retirement, and more reasons.
The following knowledge in the article is my personal learning from the market and some thumb rule which will help you navigate your journey in the stock markets over the years.
2. What is the ideal amount to start investing in the stock markets?
The ideal amount to start investing in the stock markets for the beginner will be ₹500-3000 which you have saved up. This will help you to take the real feel of the market and in case you lose the entire amount you won’t suffer from a major financial loss.
This sum of money also depends on the stock you want to buy For eg:- you want to buy a Reliance Ltd share which is trading at approx. ₹2500 you will only get 1 share if you invest ₹2500.
As you get comfortable with volatility and the general functioning of the stock market you can increase your exposure.
Also if you don’t find interest in direct stock investing you can invest via mutual funds where a manager will look after your investing by charging a small expense fee. You can do both via the Uptox broking platform.
While investing in the stock market you should not judge a company is expensive or not by its share price, you should always look at the market capitalization of the company to compare with the intrinsic value you will determine after doing fundamental analysis.
3. Patience, learning, and reading.
This is probably the most important point in this article.
When people start investing in the stock markets they think it is a gambling machine but in reality, a stock market is a compounding machine. Where you save a part of your total saving to compound over the years to rip the benefit later in your life.
To achieve the second point of the above paragraph you need to develop patience in your attitude towards the stock markets because timing the market is impossible and over a long period of time stock markets have delivered higher returns after inflation than other asset classes.
Instead of going through a mutual fund or index fund route if you want to invest directing in stocks then you should be an avid learner. Warren Buffet and Charlie Munger at the age of 90 still learn and read about different businesses and subjects.
This patience and learning attitude also compounds over the years which will help you over achieve your financial goals.
4. The 60 percent strategy.
It is observed that most successful investors have a 60% success rate in stock picks, which means 40% of the stock underperforms or is in line with the market returns.
So if you over a few years are able to achieve this kind of performance or near performance you can keep picking direct stocks and add more funds to your portfolio.
But in case you fail to do so don’t worry, by that time you must have learned the required skill to invest in equities and now you can go for mutual funds or index funds.
5. 100-age rule
This is again a thumb rule which tells us how much of a portion of our saving should go into equity and debt instruments. The 100-age rule is a formula to give you an idea of your portfolio and its safety over the years.
For Example:- If your age is 30 years which means 70% (100-30) must be invested in equity and the rest in debt. There is a major exception to this rule as well.
If you are a 25-year-old who wants to save money for this marriage for a period of five years. So investing 75% of his portfolio equities will not make any sense. If a 75-year-old wants to gift their grandchildren a portion of net worth. So investing 25% in equity will be totally wrong as they have a long-run way.
6. Beware of beginners luck
When you start investing you may get lucky with one or two stock picks which you may consider a success and start committing a larger portion of your saving in the market.
Which can turn out to be a disaster to your financial health. So being aware of it and not getting overconfident is important.
7. Basic charges to invest in the stock markets
You need to pay ₹249 as account opening charges in case of Uptox. The first-year annual maintenance charge is zero and in the case of the delivery transactions, the fees are also zero but need to pay other charges like SEBI turnover, CDSL charges, etc. If you do intraday trading the transaction cost are up to ₹20 per order.
To answer the question “What is the minimum amount to invest in the stock market?” .There is no minimum limit to start investing in the market. You can start trading with as low as 500 provided the stock you want to buy is available at that price.
But before investing having adequate knowledge amount the market and this functioning is important.
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