If growing your wealth is the goal, investing in the share market is a good option. Stock market investments can bring substantially higher returns than, say, a fixed deposit at a bank. Of course, stock market investments also carry some risk. So you will need to think about how much financial risk you can bear. This will help you ascertain how to invest in stock market in a way that works for you.
How to invest in stock market: Direct vs indirect approach
There are two primary ways to invest in stocks:
- Buy securities directly on the stock exchange
- Invest indirectly by purchasing mutual fund units
Direct stock investment: When you invest in a company’s stock on the share market, you gain part-ownership of the company. As an owner, you may receive dividend and interest payments from the company. The amount received would depend on the number of shares you own. You may also receive bonus and rights issue shares at times.
To invest in stocks directly, you must understand how the stock market works. At the very least, you have to research thoroughly the stocks on your wish-list. Study their fundamentals—that is, their governance practices, …