Chances are, they will look at you as if you are an alien from another planet. Most will answer: To make money, of course!
Then you point out that money can be made by selling shoes through the Internet, or by smuggling gold, or by becoming a movie star, or a doctor or a lawyer. Why from the stock market?
You may get the odd well thought out response to that last question; others will hem and haw, and then blurt out the truth: To make some quick money.
That is precisely the wrong reason to enter the stock market. Stocks provide inflation-beating returns over the long-term. For that to happen, stocks need to be picked carefully, and then held for the long-term.
There are two schools of thought about stock investing - value investing and growth investing. Those interested in value investing can go through the 7-Step Guide.
Those interested in finding the 'next Infosys' or the 'next L&T' may like to follow the 4-Step Guide to evaluate growth stocks:-
1. Revenue Growth - ideally the average revenue growth of a company over the past 5 years
2. Profitability - during the initial years of a company's existence, growth may require in-flow of cash through debt or additional equity. Thereafter, it will be operating and net profit margins that will determine growth
3. Efficient use of Capital - two indicators of capital efficiency are Return on Assets (ROA) and Return on Equity (ROE) ratios
4. Industry Position/Competitive Advantage - qualitative assessments about whether a company can continue to grow and outperform.
Read more from this investopedia.com article.
What is the Return on Assets (ROA) ratio?