Trading on the stock markets have their risks and rewards, while millions of people have lost a lot of money, there have also been millions of people who have become very rich by trading at the stock market. Most retail investors are often sceptical of investing their hard-earned money and savings in the stock market due to the fear of losing their money, especially when they are amateur investors and do not have much knowledge about the stock market.
Those people who have the knowledge of stock markets might be sceptical regarding investing in the stock market due to lack of experience and the risk factor associated with it. Hence the question arises, how can a prospective investor learn to trade and invest in the stock market without losing their hard-earned money. The answer to this is using a Stock Market Simulator.
What is a Stock Market Simulator?
A stock market simulator is a computer program wherein all features and functions of a stock market are replicated to allow the user to experience stock market trading without any form of financial risk.
For instance, an investor who wishes to learn how to trade and transact in the stock market can utilise a stock market simulator to make virtual or dummy trades by buying and selling stocks and shares of their choice at the prevailing market rate without incurring any financial expenses. The investor can buy and sell shares of their choice, track the profits and losses of their trades without actually incurring any profits or losses.
These stock market simulators can be highly useful for amateur and retail investors to learn how to trade and transact in the stock market, and gain confidence in investing their actual money in the stock market and make real profits and gains.
Stock Market Simulators for the Retail Indian Investor
The Government of India and the SEBI has taken many steps to make investing in the stock market easy and accessible to each and every individual. Dematerialisation of shares and Demat accounts have made it simpler and easier for every retail investor to buy and sell shares, transact and trade on the stock market.
What is Demat Account?
A Demat Account is a form of an account which enables investors of stock and shares to hold their shares in electronic or dematerialised form. Post 5th Dec 2018, SEBI has restricted the transfer of shares in physical form and transactions in share using a Demat Account enables electronic settlement of all transaction.
A Demat account is operated similar to a bank account wherein the Demat account holds stocks, shares and other forms of financial instruments instead of cash and similar to a bank account wherein the Demat account is credited and debited when shares are bought and sold. Investors can open a Demat account with zero balance of shares and also maintain a zero balance of shares in their Demat account
To open a Demat account, a person needs to approach their nearest Depository Participant or Bank offering Demat account services.
How Stock Market Simulators can help the Indian Retail Investors
- Practice Investing in the Stock Market
A Stock Market Simulator allows investors, especially first-time novice and amateur investors who have never invested in the stock market. Stock Market Simulator allows people to get a feel of investing in the stock market without exposing themselves to any forms of financial risks.
Many research indicates that retail investors who use Stock Market Simulators before making their actual stock market investments, tend to make much wiser and better investment choices, and have lower probabilities of making losses in their first-time trades compared to individuals who have not practised investing on Stock Market Simulator.
Further, using a Stock Market Simulator also aids in boosting the confidence of first-time investors who often have apprehension on investing their money in the stock market due to fear of losing their hard-earned money. When an investor experiences making some degree of virtual profits and gains on the Stock Market Simulator, they gain confidence in making actual investments in the stock market.
- Learning how the Stock Market and Different Stock Market Indices Function
Stock Market Simulators are not only useful for first-time investors but also for students or professionals who wish to invest in other countries stock markets. For instance, a student learning about the stock market can learn more about the functioning of the stock market by applying classroom learning into their investment decisions. This allows the students to learn how stock markets work and function which can help them better grades in their assignments and exams. Similarly, a professional or an investor can learn about the stock market of another country to diversify their investments and risk. For instance, an Indian investor might have the knowledge of the BSE and NSE but might not have the knowledge of financial markets in the United States. Hence these persons can use Stock Market Simulator to invest on the NASDAQ or the NYSE or any other stock exchange around the world and learn how these stock markets and indices work.
- Learning about Brokerages and commissions
Brokerage is essential expense investor need to incur while investing in the stock market. Although many online platforms offer low brokerages and commissions, brokerages and commissions can affect the return on investments.
First-time and novice investors often do not take into consideration the brokerages and commissions involve while transacting on the stock market while making their investment decision.
- Testing different Investment Strategies
Stock Market Simulator can be used to test out and experiment with different investment strategies. These investment strategies can be existing strategies used by other investors or a new and innovative strategy developed to ensure maximum returns on investments. Individuals and professionals can test their different investment strategies on the Stock Market Simulator before executing these investment strategies in the actual stock exchanges.
- It can be Fun
Individuals can use Stock Market Simulator as a game to learn how to invest in the stock exchange. Who knows, some fun and games on the Stock Market Simulator can turn someone into an actual and serious investor on the stock exchange.
To conclude, what does an investor got to lose using a Stock Market Simulator, it is definitely not their hard-earned money. Stock Market Simulator can be an effective tool to learn the stock market without losing their money.