November 10, 2020 | Investopaper
At current, there is charm among the Nepalese investors towards the stock market. The recent public offerings (IPOs) have received huge applications from about 8-9 lakh investors. Due to lack of other investment alternatives, investors have flocked towards the share market. In case of Stock Market as well, there are few financial instruments available for investment. Investors have to choose among the four major investment alternatives which include:
(a) Shares of listed companies,
(b) Debentures of public companies,
(c) Mutual Fund Units and
(d) Bonds/Debenture issued by Nepal Government
For the complete beginner, stock market can be a complex. From the necessary requirements for the trading to the risk associated in the stock market, to the investment techniques required for becoming successful, stock market can be an unfamiliar territory to the new investors.
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Here, we will try to cover the ways in which a beginner can start investing in the share market of Nepal. There are mainly three ways.
3 Ways One Can Invest In Nepal Share Market
1. Invest In IPO/FPOs
Beginning your journey in the stock market by investing in the IPO/FPOs can be fruitful for the investor. This can be a foundation and learning experience. In IPOs and FPOs, the price per share is usually Rs. 100. Usually, the FPOs are offered at a premium over the face value of Rs 100. Likewise, companies sell debenture at Rs 1,000 while the mutual fund units are priced at Rs 10.
You don’t need to invest huge sum of money in the IPO. Mere Rs 1000 is sufficient (in case of IPO of shares issued at face value). This will provide a starting platform for a true beginner. You will gain knowledge and experience at low risk while gradually investing in the stock market.
2. Invest In Mutual Funds
Those who want to take risks and generate profits from stock market but do not have time or adequate knowledge of the market can enter the stock market by buying a unit of mutual fund or by taking Portfolio management service (PMS). You can put your money in the stock market by investing in various mutual funds managed by a group of experts. Such funds receive reserved shares during IPO/FPO. Likewise, they get various tax exemptions while investment in the stock market.
Therefore, placing your faith in the mutual funds can be a good way to put your money into work in the stock market. Managed by the professional, mutual funds offer diversification along with healthy returns. You don’t need to involve yourself in the stock market. You can focus on your specific career or goals or enjoy you vacations if you are retired.
3. Invest In Secondary Market Through Stock Brokers
Some investors want to jump right into the secondary market which is actually the stock market we are talking about. Here, the share prices fluctuate second by second, which entices the speculators and investors alike. Seeing a price of company moving from Rs 200 to Rs 220 in a day excites you with the hope of making big in the market one day. However, the market also entails the risk aside from the opportunity it provides. It haunts those who have no proper understanding and experience. Hence, it is essential you act with caution rather than jump right into the trap.
Investing in the secondary market might not be bad idea. But take it slow. Start by investing small sum which, even if you lose, doesn’t affect you. Learn and gain experience along the way. After you have accumulated proper knowledge, techniques and temperament about the market, then only invest a sizable sum. Don’t gamble yourself into misery. Remember, slow and steady may not win the race nowadays, but it sure takes you to the destination.