A common question that a newbie trader wishes to ask, what is the minimum amount I need to start stock trading in India? A query whose answer we probably look for to initiate our stock investment journey.
On surface, this is probably one of the most sought-after answers among novice traders, because its kind of a risk assessment and a capability parameter at the same time. The funny part is, there is no answer to such a minimum threshold.
Well, the reality is that asking that question is sort of like asking what is the minimum amount required to buy vegetables. It looks logical on the surface, but once you actually look at you realise it makes no sense. This is because both of those questions, while they do specify the product, they don't specify the inherent commodity. I shall explain.
You see, the same way you're buying tomatoes, potatoes, or if you're pretentious enough avocadoes, not the entire vegetable market, you're not investing in stock market but in companies within the stock market. The same way each of those groceries would cost you different amounts, so would each of the stocks.
The good part is there are a ton of ways to invest money, or even trade in the markets. You can use instruments like mutual funds, options, futures, and of course the equity shares themselves. In terms of actual money required to start investing, well you simply need to cover the cost price, that is the market price of your investment. This means that when you buy shares, from say National Stock Exchange (NSE), then you have options of buying shares prices as low as Rs. 1, and as high as Rs 75000.
Moreover, how much you invest depends on variety of other factors as well, for example, if you're in your early twenties, the most common financial advice that consultants provide is have a diversified portfolio, but don't over weight the ratio of stocks. So the final investment in stock market in terms of sheer money value is frequently less.
Moreover, suppose you aspire to be an investor and not a trader, then your primary focus would he to find undervalued stocks, which as the name suggests are cheaper, so again less actual investment but over a longer period, you don't actually have to deal with the money parking problem for a while, that is to say.
But suppose you aspire to be a trader getting in all that price action, then what you invest has to be on parameters of your estimated returns, because if it doesn't then you end up just breaking even with brokerage costs.
An answer to a question like this is often subjective, subject to a whole array of parameters. A good idea is always to define your parameters first, your investment horizons and your investment capability.