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How to Invest in the Stock Market?

Updated on August 11, 2025 , 125587 views

The stock Market is gaining a lot of attention. People want to invest in stocks as it serves a great medium to earn extra Income. Making money through the stock exchange is something lucrative, but this comes with its set of risks if you don't use proper strategies.

The stock market (also called the share market) gives many avenues to invest money, but this has to be done with analysis (Technical Analysis , fundamental analysis etc) and only then one should take the Call of Investing. Today, a lot of investing takes place in penny stocks or via stock tips, this is dangerous and can result in losses to the investor.

stock-market

Investors also sometimes take exposure to complex derivative instruments called futures & options without understanding the risks, this can (and will) result in huge losses. The share market is very transparent, prices of stocks etc are available online (that's why it's called a 'live stock market') allowing investors to buy, sell and monitor their investments on a Real Time Basis. Over time the financial markets in India have matured, and today investing can take place in the equity market, commodity markets and even forex (also called currency markets). Here we try to see if an investor were to go about investing in the stock market, how can they go about this difficult task.

Choose your Stock Broker Wisely

The first step to investing in the stock market is to choose a broker on this journey. This is the person or entity who will execute the trades for the investor. The below are some key aspects one should look at:

Customer Service

Service is a very important Factor in considering a broker. Query resolution, order placing (buy or sell), contract notes (these are essential documents of the trades), Capital gains reports etc, are all very important aspects of investing. Imagine if you are trying to get in or get out of a stock and your broker is unreachable, or the call center keeps you on hold for 20 minutes? Or you are due to file your Income Tax Returns, but your broker is unable to give the Capital Gains reports on time. One needs to carefully see the service levels and track record of a broker on this aspect to avoid heartburn later. Customer service is important in investing in the stock market.

Background Check

This is like a reference check for an employee, Always ask around and do a google search etc. to see if there are an unusual number of complaints against a broker. This maybe warning signal.

Costs

Costs are important, especially if you are a trader. Even for long term investors (those Buy and Hold people) this is important. One should carefully read the fine print here and see if there are any hidden costs. A comparison of 2 to 3 brokers will give you an idea of prevailing cost structures. However, one should not choose a broker purely on costs if other aspects suffer. (no service?)

Product Suite

The variety of products available beyond just equity trading is another aspect. With time, as investors learn about other asset classes, it would be useful to have a broker Offering services such as Bonds etc. Getting stuck to a broker who offers a single product may not be something great in the future. Beyond this, you may want to see the kind of research provided and the knowledge of the broker. Also figure out if there is a 'sales approach' wherein the broker just tries to give top recommendations, or tries to give recommendation basis your profile and risk appetite. Selecting the broker is an important aspect and one should always spend some time to select the right one. Broker selection hence is a significant step in investing in the stock market.

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Stock Selection: Analysing Stocks Smartly

Smart investing is choosing your stocks wisely. This is one of the most critical aspects of 'How to Invest in the Stock Market' (if not the most critical!). Stock selection is an Industry in itself, there are fund managers, Portfolio managers & research analysts who are specialists at this job. While there can be an endless list of the factors that go into selecting a 'good stock', some of them could be :

  1. Financials of the company: Checking Balance Sheet and profit & loss statements
  2. Growth prospects: How is the growth trajectory of the company, is the company showing good growth over its peers
  3. Fundamental Analysis: Looking at key ratios ( P/E, PEG, etc), different industries require one to look at different ratios
  4. Growth: In terms of company's product line and expansion plan
  5. Management of the company - A good management can do wonder. So check the background of the management, their experience, company's growth under them, etc
  6. Strength and weakness - A good analyst will always check the good and bad about the company

Always remember stock selection is a very important aspect of investing in the stock market. Going by tips and hearsay may not result in good selection, those investing may only repent later. Also, keep learning about stock market. Read as much as you can. Keep yourself updated with latest happenings around the world. Check political news, regulations, etc.

Monitoring of Investments

If one creates stock portfolio by himself, then an important aspect is monitoring of the stocks. One needs to regularly monitor the portfolio even if its for long-term investing. There could be regulatory changes, management changes, strategy changes, a product line becoming nonviable, technology becoming obsolete etc and list could go on and on. All these impacts the share price (mostly negative!), hence monitoring is an important aspect of investing in the stock market. Also one needs to look out if the stock price has moved up and the stock has lived its potential. This could be a good price to exit. All this requires constant monitoring.

Any Other Way to Investing in the Stock Market?

Well if one did NOT have the expertise to do the stock selection and the time & effort required to do the constant monitoring, Mutual Funds present a good way for investors to invest in the stock market. Fund managers are experts in their fields and its their full-time job to select securities to invest in, they also do the job of monitoring the investments. Mutual Funds as an industry is regulated by SEBI and AMFI ensuring that rules & regulations are followed. Mutual Funds Vs stocks markets may be a good question to answer, however one needs to carefully make the choice, else you could end up burning your hard earned money. There are various Types of Mutual Funds today that can cater to all risk profiles of investors making them a viable choice for those who are new to the stock market and want to leave it to the experts. Also for those earning monthly income via salaries, Systematic investment plan (SIPs), offer a great way to create long-term wealth with a multitude of benefits. investing in Mutual Funds is relatively easy as compared to the rigors of investing in the stock market. One needs to always carefully decide the route to follow on investing that in the long run one makes money!

Some of the Best Performing Mutual Funds to look at are (ordered based on 3 year performance and having net assets > 500 crore):

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2024 (%)
DSP World Gold Fund Growth ₹33.9655
↑ 0.36
₹1,20218.538.166.632.89.815.9
SBI PSU Fund Growth ₹31.3241
↑ 0.04
₹5,4271.712.5-5.931.329.623.5
Invesco India PSU Equity Fund Growth ₹62.25
↑ 0.62
₹1,4393.116.9-5.730.927.425.6
ICICI Prudential Infrastructure Fund Growth ₹193
↑ 1.08
₹8,0433.913.32.829.435.427.4
HDFC Infrastructure Fund Growth ₹47.204
↑ 0.21
₹2,5913.113.6-1.429.433.123
Nippon India Power and Infra Fund Growth ₹339.008
↑ 2.60
₹7,6202.212.7-5.9293026.9
Franklin India Opportunities Fund Growth ₹248.243
↓ -0.19
₹7,2002.49.50.528.828.837.3
Franklin Build India Fund Growth ₹139.993
↑ 0.59
₹2,9683.713.8-0.628.132.427.8
Motilal Oswal Midcap 30 Fund  Growth ₹101.198
↑ 0.78
₹33,0532.88.63.427.933.657.1
Bandhan Infrastructure Fund Growth ₹49.378
↑ 0.19
₹1,7492.311.7-10.127.732.539.3
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Aug 25

Research Highlights & Commentary of 10 Funds showcased

CommentaryDSP World Gold FundSBI PSU FundInvesco India PSU Equity FundICICI Prudential Infrastructure FundHDFC Infrastructure FundNippon India Power and Infra FundFranklin India Opportunities FundFranklin Build India FundMotilal Oswal Midcap 30 Fund Bandhan Infrastructure Fund
Point 1Bottom quartile AUM (₹1,202 Cr).Upper mid AUM (₹5,427 Cr).Bottom quartile AUM (₹1,439 Cr).Top quartile AUM (₹8,043 Cr).Lower mid AUM (₹2,591 Cr).Upper mid AUM (₹7,620 Cr).Upper mid AUM (₹7,200 Cr).Lower mid AUM (₹2,968 Cr).Highest AUM (₹33,053 Cr).Bottom quartile AUM (₹1,749 Cr).
Point 2Established history (17+ yrs).Established history (15+ yrs).Established history (15+ yrs).Established history (19+ yrs).Established history (17+ yrs).Established history (21+ yrs).Oldest track record among peers (25 yrs).Established history (15+ yrs).Established history (11+ yrs).Established history (14+ yrs).
Point 3Rating: 3★ (upper mid).Rating: 2★ (bottom quartile).Rating: 3★ (upper mid).Rating: 3★ (lower mid).Rating: 3★ (lower mid).Rating: 4★ (upper mid).Rating: 3★ (bottom quartile).Top rated.Rating: 3★ (bottom quartile).Rating: 5★ (top quartile).
Point 4Risk profile: High.Risk profile: High.Risk profile: High.Risk profile: High.Risk profile: High.Risk profile: High.Risk profile: Moderately High.Risk profile: High.Risk profile: Moderately High.Risk profile: High.
Point 55Y return: 9.78% (bottom quartile).5Y return: 29.64% (lower mid).5Y return: 27.42% (bottom quartile).5Y return: 35.39% (top quartile).5Y return: 33.09% (upper mid).5Y return: 30.04% (lower mid).5Y return: 28.84% (bottom quartile).5Y return: 32.44% (upper mid).5Y return: 33.64% (top quartile).5Y return: 32.50% (upper mid).
Point 63Y return: 32.83% (top quartile).3Y return: 31.35% (top quartile).3Y return: 30.86% (upper mid).3Y return: 29.35% (upper mid).3Y return: 29.35% (upper mid).3Y return: 28.99% (lower mid).3Y return: 28.77% (lower mid).3Y return: 28.15% (bottom quartile).3Y return: 27.87% (bottom quartile).3Y return: 27.68% (bottom quartile).
Point 71Y return: 66.61% (top quartile).1Y return: -5.88% (bottom quartile).1Y return: -5.67% (lower mid).1Y return: 2.80% (upper mid).1Y return: -1.44% (lower mid).1Y return: -5.94% (bottom quartile).1Y return: 0.55% (upper mid).1Y return: -0.60% (upper mid).1Y return: 3.43% (top quartile).1Y return: -10.07% (bottom quartile).
Point 8Alpha: 1.97 (top quartile).Alpha: 0.60 (upper mid).Alpha: 0.81 (upper mid).Alpha: 0.00 (upper mid).Alpha: 0.00 (lower mid).Alpha: -7.82 (bottom quartile).Alpha: -1.73 (bottom quartile).Alpha: 0.00 (lower mid).Alpha: 3.89 (top quartile).Alpha: 0.00 (bottom quartile).
Point 9Sharpe: 1.80 (top quartile).Sharpe: -0.23 (lower mid).Sharpe: -0.23 (lower mid).Sharpe: 0.01 (upper mid).Sharpe: -0.23 (upper mid).Sharpe: -0.41 (bottom quartile).Sharpe: -0.09 (upper mid).Sharpe: -0.29 (bottom quartile).Sharpe: 0.23 (top quartile).Sharpe: -0.29 (bottom quartile).
Point 10Information ratio: -0.35 (bottom quartile).Information ratio: -0.28 (bottom quartile).Information ratio: -0.15 (bottom quartile).Information ratio: 0.00 (upper mid).Information ratio: 0.00 (upper mid).Information ratio: 1.16 (top quartile).Information ratio: 1.71 (top quartile).Information ratio: 0.00 (lower mid).Information ratio: 0.44 (upper mid).Information ratio: 0.00 (lower mid).

DSP World Gold Fund

  • Bottom quartile AUM (₹1,202 Cr).
  • Established history (17+ yrs).
  • Rating: 3★ (upper mid).
  • Risk profile: High.
  • 5Y return: 9.78% (bottom quartile).
  • 3Y return: 32.83% (top quartile).
  • 1Y return: 66.61% (top quartile).
  • Alpha: 1.97 (top quartile).
  • Sharpe: 1.80 (top quartile).
  • Information ratio: -0.35 (bottom quartile).

SBI PSU Fund

  • Upper mid AUM (₹5,427 Cr).
  • Established history (15+ yrs).
  • Rating: 2★ (bottom quartile).
  • Risk profile: High.
  • 5Y return: 29.64% (lower mid).
  • 3Y return: 31.35% (top quartile).
  • 1Y return: -5.88% (bottom quartile).
  • Alpha: 0.60 (upper mid).
  • Sharpe: -0.23 (lower mid).
  • Information ratio: -0.28 (bottom quartile).

Invesco India PSU Equity Fund

  • Bottom quartile AUM (₹1,439 Cr).
  • Established history (15+ yrs).
  • Rating: 3★ (upper mid).
  • Risk profile: High.
  • 5Y return: 27.42% (bottom quartile).
  • 3Y return: 30.86% (upper mid).
  • 1Y return: -5.67% (lower mid).
  • Alpha: 0.81 (upper mid).
  • Sharpe: -0.23 (lower mid).
  • Information ratio: -0.15 (bottom quartile).

ICICI Prudential Infrastructure Fund

  • Top quartile AUM (₹8,043 Cr).
  • Established history (19+ yrs).
  • Rating: 3★ (lower mid).
  • Risk profile: High.
  • 5Y return: 35.39% (top quartile).
  • 3Y return: 29.35% (upper mid).
  • 1Y return: 2.80% (upper mid).
  • Alpha: 0.00 (upper mid).
  • Sharpe: 0.01 (upper mid).
  • Information ratio: 0.00 (upper mid).

HDFC Infrastructure Fund

  • Lower mid AUM (₹2,591 Cr).
  • Established history (17+ yrs).
  • Rating: 3★ (lower mid).
  • Risk profile: High.
  • 5Y return: 33.09% (upper mid).
  • 3Y return: 29.35% (upper mid).
  • 1Y return: -1.44% (lower mid).
  • Alpha: 0.00 (lower mid).
  • Sharpe: -0.23 (upper mid).
  • Information ratio: 0.00 (upper mid).

Nippon India Power and Infra Fund

  • Upper mid AUM (₹7,620 Cr).
  • Established history (21+ yrs).
  • Rating: 4★ (upper mid).
  • Risk profile: High.
  • 5Y return: 30.04% (lower mid).
  • 3Y return: 28.99% (lower mid).
  • 1Y return: -5.94% (bottom quartile).
  • Alpha: -7.82 (bottom quartile).
  • Sharpe: -0.41 (bottom quartile).
  • Information ratio: 1.16 (top quartile).

Franklin India Opportunities Fund

  • Upper mid AUM (₹7,200 Cr).
  • Oldest track record among peers (25 yrs).
  • Rating: 3★ (bottom quartile).
  • Risk profile: Moderately High.
  • 5Y return: 28.84% (bottom quartile).
  • 3Y return: 28.77% (lower mid).
  • 1Y return: 0.55% (upper mid).
  • Alpha: -1.73 (bottom quartile).
  • Sharpe: -0.09 (upper mid).
  • Information ratio: 1.71 (top quartile).

Franklin Build India Fund

  • Lower mid AUM (₹2,968 Cr).
  • Established history (15+ yrs).
  • Top rated.
  • Risk profile: High.
  • 5Y return: 32.44% (upper mid).
  • 3Y return: 28.15% (bottom quartile).
  • 1Y return: -0.60% (upper mid).
  • Alpha: 0.00 (lower mid).
  • Sharpe: -0.29 (bottom quartile).
  • Information ratio: 0.00 (lower mid).

Motilal Oswal Midcap 30 Fund 

  • Highest AUM (₹33,053 Cr).
  • Established history (11+ yrs).
  • Rating: 3★ (bottom quartile).
  • Risk profile: Moderately High.
  • 5Y return: 33.64% (top quartile).
  • 3Y return: 27.87% (bottom quartile).
  • 1Y return: 3.43% (top quartile).
  • Alpha: 3.89 (top quartile).
  • Sharpe: 0.23 (top quartile).
  • Information ratio: 0.44 (upper mid).

Bandhan Infrastructure Fund

  • Bottom quartile AUM (₹1,749 Cr).
  • Established history (14+ yrs).
  • Rating: 5★ (top quartile).
  • Risk profile: High.
  • 5Y return: 32.50% (upper mid).
  • 3Y return: 27.68% (bottom quartile).
  • 1Y return: -10.07% (bottom quartile).
  • Alpha: 0.00 (bottom quartile).
  • Sharpe: -0.29 (bottom quartile).
  • Information ratio: 0.00 (lower mid).

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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