Guide

How to invest with less money: Detailed Guide

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A lot of people think, investing in the stock market requires a lot of money.

This isn’t true.

In fact, you can start investing with very little money. Less than 500 rupees!

Here’s a step by step detailed guide, which explains in simple words – how to invest with less money in the stock market.

How to invest with less money

Open A Demat Account

The first step is to open a Demat and Trading account. Visit our Top Brokers page and select a company you like.

In this article, we will use the example of ‘Zerodha’ which is currently the biggest stock broker in India.

Visit Open an Account page on Zerodha.

Enter your Mobile Number. You will receive an OTP to verify your number.

After this, enter your Email Address and verify it. Then enter your PAN Card number and Date of Birth.

Next, you need to make the payment.

How to invest with less money: Detailed Guide 1

If you do not wish to trade in commodities on MCX, you need to pay just ₹ 200 for opening an Equity account.

Follow the rest of the procedure – like linking your Aadhar, entering a few other details and finally face verification using a webcam.

The procedure is simple. If you do not understand, you can watch the detailed guide in the video below.

Your account should be active and ready to use within 24 hours.

Buy your first stock

The second step is the more exciting part. Buying your first stock!

Add some funds to your Zerodha Account – you can add 100, 200, 500, 1000 or 5000. It’s your wish entirely.

Transfer of funds from your bank account to your Zerodha account is free if the transaction is done through UPI.

Next, buy your first stock!

The question that’ll immediately pop into your mind is – which stock to buy?

This is the beginning of a long and exciting journey in the stock market. You’ll learn much more here than what you learnt in school and you’ll learn more than what books can teach.

Always remember one thing, you make money in the stock market by making as few mistakes as possible. When you make a mistake, it’s important not to repeat them.

Back to the question, which should be the first stock you buy.

This depends on your capital. However, in the first 2-3 years of your investing journey, you should stick to Nifty 50 companies.

These are the Top 50 listed companies in the country. In the long term, chances of losing money in these companies is the lowest.

Some examples of companies to pick:

AmountStock to Buy
1001 Share of ONGC
2001 Share of ITC
5001 Share of Sun Pharma or 2 shares of ITC
10001 Share of Infosys or 2 shares of ITC and 1 share of Sun Pharma
50001 Share each of Reliance and Britannia

Note: The above names are just examples and not stock recommendations. Please do your own research before buying any stock.

Now that you have bought your first share, it’s time to observe and learn.

Let’s say you bought 1 share of ITC. The day after you buy, the price of the stock might rise. On the second day, the price might rise further.

Observe what you feel. Most probably, you will feel like buying more shares. This feeling is important. It’s called greed.

However, if the price falls continuously for 2 or 3 days, exactly the opposite will happen. You might start to believe you are unlucky or you picked the wrong stock.

Fear and Greed play a important role in the stock market. It’s what drives the market.

When the market is crashing, people sell their stock at cheaper prices fearing the market would go down further.

When the market is rising, people buy stocks at higher prices believing the market would rise further and they would make more money.

As a new investor, experiencing the emotions of the market is extremely important to make you a successful investor in the long run.

Investing or Trading

The next step is to figure out your own nature and working on improving it.

Are you an investor or trader?

Very few people in the stock market have a long term mindset. Many enter the stock market to become long term investors, but if a stock rises 10% they book profit and try to find a new stock to invest in.

These are beginner mistakes which you need to make. Not making mistakes and not having regrets is impossible in the stock market. You will make them, you will regret them and eventually learn from them.

Trading is not easy, especially intraday and short term trading. It requires several years of experience. You need to lose money (in most cases, a lot of money) before you begin to make money. Only 1-2% of all traders, go on to become successful traders.

Long term investing is easier. The chances of losing money is a lot lesser, if you invest in quality companies. Learning to pick the right companies and working on having a long-term mindset, takes time and effort.

Some Tips for Beginners

  1. Invest more time into learning, instead of always looking for new stocks to invest in.
  2. Invest when the market is falling, and not when it is rising.
  3. If you like trading, start with a small capital, learning technical analysis, work on your discipline and then once you begin to become a profitable trader – put more money into the market.
  4. Remember, trading with a small capital and trading with a large capital – are two different things altogether. When the capital is small, you will make fewer mistakes. When the capital is large, it will play on your emotions and you will end up making more mistakes.
  5. Whether it is trading or investing, only put the amount of money you can afford to lose – until you get enough experience, which should take 2-3 years at the very least.
  6. Protecting your capital in the first few years is more important than making a lot of money.
  7. If you are a beginner and suddenly making money, think why the market is allowing an inexperienced person to make so much? The market might have lured you into entering it at its very peak. Be rest assured, the fall is coming and you’ll get trapped. There is no easy money here.

All the above points are not to discourage you. The stock market is a fantastic place where a lot of money can be made and you can also gain immense amount of knowledge.

The stock market can change your life – both financially and psychologically.

Again, this can happen in both ways. It can destroy you or make you wealthy and humble!

However, the chances that it will destroy you is very high in the first 2-4 years. After you gain experience and understand the market, the chances of you making destructive mistakes will reduce and you will automatically begin to make money.

Congratulations on starting your stock market journey. If you need any help or have any questions, post them in the comments section below.

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