What is the minimum money I need to start

Stock trading in India?

By Kritesh Abhishek

What is the minimum money I need to start stock trading in India? This is
one of the most asked question by the beginners when they start investing in stock
market. Different fresh investors in different formats ask the same question. It goes
like this:
What should be the ideal amount to start investing in the Stock Market?
What is the minimum money I need to start stock trading in India?
I want to invest in stock market but I do not know how much to invest?
What should be the minimum amount can I invest in stock market for long
term?
I want to invest in stock market, but I dont have much money. Is there any
any minimum number of stocks that I must buy?
The general answer for all these questions is there is no minimum money to start
investing in stock market in India.
You can buy stocks for even less that Rs 10 also if you find an interesting one
(Indian stock exchanges BSE & NSE has a number of stocks pricing less than even
Rs 10). You dont need to have thousands or lakhs to start trading in India. Any
amount, from which you can buy a stock, is decent enough to start trading, no
minimum money to start investing in stock market required.
Here I am presenting a list of 10 big companies whose stock prices are less than Rs
100.

S.No Company Price (In Rs)

1 Idea Cellular 86.70
2 Federal Bank 92.70
3 Ashok Leyland 82.50
4 Tata Power 85.55
5 Crompton Greaves 79.50
6 IDBI Bank 75.10
7 National HyroElectric 32.25
Power Corporation
(NHPC)
8 Reliance comm 36.80
9 SAIL (Steel Authority 63.85
India Ltd)
10 Bombay Dyeing 83.50

You can easily invest in these companies. Funny, the stock prices of these
companies are even less than the Ola or Uber ride fare that you take in your
hometown. Still people speculate that buying stocks are expensive. In addition, you
can further find a list of large number of stocks, who range from RS 1 to 100 here:
http://money.rediff.com/companies/price-sorted/10-100

So, the answer for the question of what is the minimum money I need to start stock
trading in India? definitely is that there is no minimum money limit required for
starting stock trading in India.
However, is this all that you wanted to know form the topic of the post? No, I dont
think so.
The next big question should be then How much should I invest in the
stock initially if there is no minimum money I need to start stock trading?.
The answer is, if you are new to the market and in the learning phase, it is always
recommended to start low. Invest as low as possible and focus on the learning.
Anything between Rs 100- Rs 1000 will be good. You really dont want to lose
thousand of your money in the starting and they promising angrily to yourself that
you wont ever return to the market.
But, this doesnt mean that you should take this limit as fixed rule for initial
investing. Suppose, if you found a stock, which is bit costlier, say Rs 1400. But you
have done your homework, gone through the stock fundamentals, and are confident
that the stock will rise in the future and give you good return and profits, then, you
should go for it. The starting investment limit shouldnt be a factor there.
But as a thumb rule for the beginners, anything between Rs 100- Rs 1000 can be
used as the first stock market investment.
The great advantage of this amount is that you wont lose too much if the things
doesnt work out as you imagined. Maybe, you misinterpreted the stock or did the
fundamental study wrong, or the stock price fell due to some bad fortune. Still, you
wont be affected too much financially by the loss. As the saying goes:
Failures are the best teachers.
From your first investment, you need to learn a lot. Remember, its not always about
winning. You should always remember is famous quote Sometimes you win, &
sometimes you learn.
Further, from your first investment, you will learn more important things. You will
learn what things to do and moreover you will learn what things not to do.
In addition, losing a small money wont affect your morale and you can come back
in the game again, and next time even more prepared and informed.
On the other hand, If you won, the stock price rose, then congratulations. You have
done a great job!
It gives you a great lesson when your first investment is a failure, but it gives a
tremendous joy when your first stock is a win. Its a life time memory.
For my case, I bought three stocks during my first investment. Out of three, two
performed well and the third under performed for 3 months. Although the overall
portfolio was in profit, still the return was not good as the total was averaging out.
Therefore, I sold the third stock after the third month.
For beginner investors, I will suggest to follow their stock portfolio for first 3-5
months before investing heavily on other stocks. The initial big profits on your stock
might give you a great confidence to keep buying additional stocks. But you
shouldnt be greedy at that moment. You must remember that for beginners, its
more important to learn how to do value investing, that to earn money. And once
you have learn the basic, then the game is yours.

100 minus your age rule

This is a very famous rule about how much you should invest in stock market and
widely known as 100 minus your age rule. The rule is based on the principle of
gradually reducing your risk as you get older. The rules goes like this. The
percentage of the stock holding in your net worth should be equal to 100
minus your age.
For example, Lets say your age is 20 and your total savings till date is Rs 1000.
Then, the amount that you should invest in the stock market should be (100-20) =
80% of your total net worth. That is, you should invest Rs 800 in stock market, if you
are of age 20 from a total saving of Rs 1000.
You can read the complete post about 100 minus your age rule here:
http://www.investopedia.com/articles/investing/062714/100-minus-your-age-
outdated.asp

The X/3 Rule:

This is another popular rule among beginners to reduce the risk while investing. The
rule says to invest only x/3 amount in the beginning, if x is the total amount you
intended to invest in a stock. Then, after few days you can invest your next x/3
amount to the stock if its doing good. And finally the last x/3 again after few days.
For example, if you intend to invest Rs 10,000 in a stock, dont buy from the whole
amount at one go. Invest only 10,000/3= Rs 3,333 initially. If you find your stock
growing, then you can add Rs 3,333 in the next round of investment and the last Rs
3,334 in the round after that.
The rule greatly minimizes the risk.
The only problem with this rule it that it reduces the focused amount, so the final
profit might be little less that expected if the whole amount was invested the same
time. Still its a great rule for a stock market beginners and helped a lots of newbie
to reduce their risk and losses significantly.
There is one more rule called the 75% profit rule. However, it is more like a
hypothesis that a rule. It states that if 75% stocks in your portfolio is doing good,
then you can invest further. For example, if you have bought 4 stocks and 3 of them
are doing good, then it means that your strategy is working. You can increase your
investment. The chances of all the stocks in your portfolio(4/4) working great is very
limited. Even Warren Buffett, the greatest investor of all time, has some stocks in
the portfolio which gave him negative returns.
So, if 75% of your stocks are doing great, it means that your strategy is good and
its not the luck that is driving your portfolio (If you have only one stock in your
portfolio and its growing fast, there might be a change of luck factor also, but if 3
out of 4 stocks in your portfolio is growing, its more because you did your homework
correctly).
So, there are the tips and tricks for the beginners to invest in the stock market.
One more thing I would like to add in this post. There are also some additional
charges while buying a stock online and the buyer has to pay for it. It is generally
less than 1% of the amount of the transaction. The additional charges are brokerage
charge, Service charge, STT etc. Therefore, you also have to keep these in mind
during buying a stock. Although, they are very small amount, but still they will add
up in the final amount of the stock that you bought bought.
Hence, for all those who are asking What is the minimum money I need to
start stock trading in India?, the answer is that there isnt a minimum money I
need to start trading in India. Anything that suits you is good enough for the market.
Any money at which you can buy a stock, works fine for entering the market. Any
amount that you are ready to invest, is great to start stock trading in India.
Further, I hope my post What is the minimum money I need to start stock trading in
India is useful for the readers. If you need any further clarification, or have any
doubts, feel free to contact. I will be happy to help you out. If you want to read the
complete blog post, you can visit it here: http://www.tradebrains.in/minimum-
money-i-need-to-start-stock-trading/
I also recommend you to check out these posts on stock investing:

How to follow Stock Market!

How to create your Stock Portfolio?