How To Invest in Share Market?

 When it comes to investment options, the stock market is always seen as the first option. The simple reason for this is that you rarely get returns like stock market in any other investment option. But with the potential to give good returns in the stock market, the risk is also the highest.

We all dream of becoming rich from the stock market. But successful is the one who keeps learning it in the right way. That is why before investing in the share market, you should get the information about the stock market well. If you are a new investor and want to learn share market then in this article you will get complete information about how to invest in share market.

How to invest in share market

Investing in the stock market is very complicated for many people. If you get the right information about how to invest in the stock market, then it becomes very easy for you. With the help of the following steps, you will understand the entire process of investing in the stock market.

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1. Documents for the Share Market

To invest in the stock market, you first have to open a trading and demat account. You need some documents to open it.

(i) PAN Card – It is mandatory for you to have a PAN card to invest in the stock market. Without PAN card you cannot open your demat account. PAN number is a 10 digit card whose full name is Permanent Account Number. If you do not have a PAN card, you can also get it made online from the NSDL website.

ii) Aadhar Card – You must also have Aadhar card with you as an address proof. Aadhar card helps in e-sign in online application for demat account. Apart from this, you can also submit your Kyc documents.

(iii) Bank Account – If you are going to invest in the stock market then you should already have a bank account. Also you should have internet banking facility. By the way, nowadays the facility of adding funds to the demat account is also available through Google Pay, UPI. Still, you should take internet banking facility in your bank account.

2. Choice of Broker

If you want to buy shares of a company in the stock market, then you cannot buy shares directly through the stock exchange. You can buy shares in the stock market only through a broker. This broker acts as an intermediary between you and the stock exchange.

The broker provides you the facility of demat and trading account through which you can buy shares. It is essential to choose a reliable and reputed broker to invest in the stock market. There are many discount brokers and full service brokers available in the market.

As a stock market beginner, a discount broker would be right for you. Discount brokers have very low brokerage and annual fees. In Best Discount Broker you can open your demat account with Upstox, Angel Broking, Zerodha etc.

3. Opening of Demat Account

The next episode of How to invest in Share Market is to open a demat account. After selecting a stockbroker for yourself, you need to open a demat account with it. As a new investor, you can open your Demat account in Upstox if you want. Its interface is very simple and its mobile trading app is easy to understand. Rest you can choose any broker as per your requirement.

Nowadays almost all brokers allow their clients to open demat accounts both online and offline. You can easily open your Demat account with the above mentioned documents.

You also need to know the difference between demat account and trading account –

Trading Account – Trading account is used to buy and sell shares.

Demat Account – Shares purchased through trading account are deposited in the demat account. Shares are deposited in this account in electronic form. The demat account is debited on the sale of shares whereas the credit for the purchase of shares. Shares held in demat account are managed by CDSL or NSDL. For example the shares in the Demat account of Upstox and Zerodha are managed by CDSL.

You do not need to open these two accounts separately. Nowadays all the brokers provide the facility of opening trading cum demat account.

4. How much money is needed to invest in the stock market?

There is no minimum amount requirement for investing in the share market. You can invest as per your requirement by adding money to your trading account. For example you have to buy 10 shares of Vodafone-Idea. If the price of 1 share of Vodafone-Idea is running at ₹ 10, then you can buy shares by simply putting ₹ 100 in your trading account.

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In this way you can invest ₹ 500, ₹ 1000, ₹ 10000 in the stock market. There is no limit to the maximum investment in the stock market.

You can add money to the trading account yourself through your mobile trading app or trading platform.

Also, there is no provision to maintain a minimum balance in the trading account. The brokerage levied on buying and selling of shares is deducted directly from the trading balance. You do not have to make any manual payment for brokerage or Annual Fee (AMC).

5. How to Buy Shares

Before buying shares, you should know how to choose the best stock for you. To avoid losses in the stock market, one should not do intraday in the early stages. Apart from this, buying shares on the basis of tip should be avoided.

There are two markets in the stock market through which we can buy shares –

(i) Primary Market – Primary market is the market where shares are offered for purchase even before they are listed on the stock exchange. In the primary market, a company for the first time issues its shares to be sold to the public. This work is done through IPO (Initial Public Offer). You will get information about what is IPO in this article.

If you want to buy shares in IPO then you can apply for IPO through ASBA Internet Banking or Bank UPI. If shares are allotted to you in the IPO, then these are credited to your demat account.

(ii) Secondary Market – After the IPO, the shares of the company start trading in the secondary market. You can buy shares of already listed company through your broker. You can easily buy shares through your computer or smartphone.

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Nowadays all stockbrokers have a mobile app through which you can trade. In this, by searching the company's shares you want to buy, you have to quote the quantity and buying price. You get the shares as soon as you get a seller for the deal. You will find this process very easy once you do it.

Apart from this, the full service broker also allows you to buy and sell shares through calls.

6. What is Trading Account Balance?

If you have sold shares of a company, then its money does not come directly to your bank account and comes to your trading balance. Suppose you have sold ₹1,000 shares of a company. This ₹1,000 will be credited to your trading balance. If you want, you can buy more shares from that balance or transfer that balance to your bank account.

7. What are the types of trading?

A new investor may be confused about the types of trading. Trading in the stock market can be mainly divided into two parts.

(i) Intraday Trading – In this type of trading, buy or sell deals have to be done on the same day. If you have bought any shares today in intraday, then you have to sell those shares back before the market closes. Intraday trading is done to earn profit from the fluctuations in a share price. To trade intraday, you have to select Intraday or MIS while placing a buy order.

(ii) Delivery Based Trading – If you buy shares to hold the shares for a long time, then it is called delivery best trading. You become the real owner of the stocks you bought in delivery. To buy shares in delivery based trading, you have to choose the delivery or CNC option while buying the shares. New investors should look to buy quality stocks and hold them for a long time.

(ii) Delivery Based Trading – If you buy shares to hold the shares for a long time, then it is called delivery best trading. You become the real owner of the stocks you bought in delivery. To buy shares in delivery based trading, you have to choose the delivery or CNC option while buying the shares. New investors should look to buy quality stocks and hold them for a long time.

8. How are the benefits of investing in the stock market?

How will you profit from investing in the share market? You become a partner in the profit and loss of the company in proportion to the amount of shares you buy. By buying shares of a company, you mainly benefit in two ways.

(i) Increase in the value of the share – An increase in the value of a share is one of the main sources of profit on the purchase of shares. As the company expands and increases its business and profits, the value of the company increases.

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If today you have bought 100 shares of a company for ₹ 100, then after some time the value of one share increases to ₹ 150. If you sell those shares then you will get profit of ₹5,000 (50*100). Similarly, if the value of the stock falls and you sell your shares, you will incur a loss.

(ii) Dividend – The profit that is received in another way by buying shares is from dividends. Now you must be thinking that what is this dividend, dividend means dividend. In case the company is in profit, some part of its profit can be distributed to its shareholders.

For example you have 1,000 shares of SBI Bank. If the company declares a dividend of ₹2 per share, you will receive a total dividend of ₹2,000 (1,000 × 2).

You can invest in such stocks which give good dividend. In this you will get regular dividend along with price appreciation.

Whenever the company gives you a dividend, you get that dividend in that bank account which is linked to your demat account. Whether to pay dividend or not depends on the board of the company.

9. What are the things to keep in mind before investing in the share market?

After knowing how to invest in the stock market, you need to keep some things in mind before investing in the stock market. This will help you avoid the mistakes that most new investors make.

(i) Invest as per your goals – Invest according to your goals to achieve your long term goals. As a stock market beginner, avoid investing a huge amount in one go. Start investing by buying quality shares in small quantities.

(ii) Risk Profile and Time Period – If you invest in the stock market, then there will be risk in it. But the risk becomes more when you start buying shares without tips and any research.

Always invest according to your risk taking ability. Buy only those stocks whose business model you understand. Try to stay invested in them for a long time. Timing matters a lot in the stock market, the longer you stay invested, the higher will be your returns.

(iii) Diversify the portfolio – Diversification is very important in the stock market. If you want to invest ₹ 100, then you should not invest the entire ₹ 100 in any one company. Ideally you should invest ₹100 in five different companies. This greatly reduces the amount of risk.

Thus you should try to build a well balanced portfolio. A good portfolio should have a mix of some good sectors.

Apart from this, too many stocks should not be kept in your portfolio. You may have to face many problems due to excessive stock.

(iv) Avoid intraday and short term trading – The priority of a new investor should be to save their capital rather than earning money. Intraday and short term trading are techniques that cause most of the investors to lose a lot of their money. Due to which they are deprived of the benefits of long term investment except in the stock market.

There is a lot of risk involved in this type of trading. So at least in the initial phase you should stay away from intraday and short term trading.

(v) Track the investment at regular intervals – You must have heard the saying “Invest and forget”. These are a rule of investing in the stock market. But you must track your invested shares quarterly.

In the quarterly results, you should see how the company's profits are, whether any government policy is having a bad effect on the business of the company, etc. With this, you will be sure about the future of the company and maintain your wealth creation momentum.

Conclusion – How to invest in share market

Many people have become rich by investing in the stock market. The next name in it can be yours too. But investing in the stock market is not that easy either. If it is not done properly then it can also give you a lot of damage. But investing wisely, based on research in the right way and learning continuously can make you a very good wealth in the long run.

That is why try to learn and understand the stock market instead of considering it as a speculative market. For this, you read the best stock market books and magazines. Also, keep expanding your knowledge continuously.

Friends, I hope that you have liked this article on how to invest in the stock market. You can also share this article with your friends on social media networks and tell your questions or suggestions through the comment box.