In August 2022, the Indian financial markets witnessed a new milestone. For the first time ever, the number of Demat accounts in the country hit the 10-crore mark. The numbers have more than doubled since the pandemic and are a clear indication of the growing acceptance of the securities market as an investment avenue among individuals.
No doubt, investing in the stock market is nothing short of a roller-coaster ride. But in the long run, it is one of the most effective ways to build wealth. Picking the right stocks with the right investment strategy can give excellent returns, help you diversify your portfolio, and even act as a secondary source of income in times of emergency.
And with so many people accepting the stock market as a lucrative investment avenue, you must also be tempted to open an account and start investing.
Not sure where to start? Read this article to know in detail how to start your journey in the stock market for beginners.
A share market, also known as an equity market is a stock market where companies issue shares which are then traded by buyers and sellers. The share market trades different types of securities ranging from bonds, shares and mutual funds, to futures and options and other financial instruments.
The most critical part of the share market is the stock exchange, which is basically the platform through which stocks can be purchased and sold. It mediates and regulates the issuance and trade of company shares. Stocks and other financial securities can only be traded once they are listed on the stock exchange.
In simple words, a stock exchange is a platform that allows buyers and sellers to meet and trade securities. In India, we have two stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
Investing in the stock market is simple and convenient, thanks to the online process of opening and trading with a Demat account. Here are the steps you need to take to buy stocks from the convenience of your own home:
Step 1: Demat account setup
The Demat account is where your invested securities will be held digitally. So, the first step is to open a Demat account and link it to an existing bank account in order to conduct transactions seamlessly.
To open the Demat account, you need to select a stock broker who is a registered member of the stock exchange and will trade on your behalf. Your selection of the broker should be based on the brokerage charges, research and advice services, and trading platforms. After you've created your account, sign in to it via the mobile app or web platform.
Step 2: Know the basics of investment
Fundamental and technical analysis is essential for making sound investment decisions. Fundamental analysis examines the company's financial health by reviewing its financial statements, whereas technical analysis examines prior market data to discover patterns.
Based on this knowledge, you can select the right type of investment, such as stocks, mutual funds, bonds, derivatives, and more, depending on your long-term and short-term investment goals. Also, determine the investment horizon for which you want to hold the stock based on your goals.
And finally, before you invest in the stock market, you must know about the stock market timings. The Indian markets open between 9:00 AM to 9:15 AM for a pre-open market session. Then the trading hours start at 9:15 AM and end at 3:30 PM. Post 3:40 PM, the closing session begins, which ends at 4:00 PM.
Step 3: Add funds to your Demat account
After you have selected the stocks you want to purchase, you need to add money to your Demat account to facilitate the purchasing process. The stock broker will buy the stocks on your behalf at the quoted price and specify the quantity from your Demat account itself.
After selecting the stock and quantity, your purchase order will be executed when the seller responds to your request. Following the end of the transaction, the required money will be debited, and the purchased shares will be credited to you from your Demat account.
Step 4: Build a diversified portfolio
Consistency in investing is required to establish a robust portfolio that can help you reach long-term financial goals. Continue to build your portfolio and invest in more equities over time. It is beneficial to have a diversified portfolio of equities from various sectors to distribute risk and maximize returns. At the same time, avoid over-diversification. It is preferable to invest in 10-12 solid companies' stocks.
Additionally, you can invest in equities on a regular basis using a Systematic Equity Plan (SEP), which is similar to a mutual fund's SIP.
Step 5: Keep track of your portfolio
It is critical to constantly monitor your investments to ensure they are doing well. You should also keep up with news and updates about the companies in which you have invested.
This will help you keep track of which of your holdings perform best in a bear market, when to sell, and how to increase your profits in bull markets.
You can open your Demat account from any of the registered brokers. Irrespective of the broker, you will need the following documents to open your Demat account.
Before you start your investment journey in the stock market, there are a few things you need to consider to make the most of it.
1. Investment objectives
Every person is unique, as are their investment objectives. Before learning how to invest in the stock market, you should first determine your financial goals. You should also know how long you want to invest and the fixed amount you want to invest to minimize your risk as a first-time investor.
You should have a clear objective in mind before investing. Whether you want to build a nest egg for retirement or save for your child's education, having clear financial goals will help you analyze the investment options better based on their expected returns.
Coherence between your objective and returns will eventually help you build a strong portfolio that will help you achieve your investment objectives in time.
2. Make informed decisions
No matter how appealing the stock market appears, it is recommended that you conduct research online before investing money. It is critical first to educate oneself on the fundamentals of the market. Understand the terms used in online trading and investment, the difference between BSE and NSE, or the various index such as what is Sensex and Nifty.
Further, make sure to research the company or industry you want to invest in – check the past growth patterns, profitability, market growth, and more to ensure the safety of your investment. And if you are new to investing, it is preferable to always ask an advisor or an expert before making any decision.
3. Risk-bearing ability
Investing in the stock market comes with its own share of highs and lows. So, when preparing to invest in the stock market, it is important to consider the risks involved. Investors with a low-risk tolerance should consider investing in stable, high-growth companies which generate consistent returns and are less affected by market volatility.
Once you determine your risk tolerance, it will be easier to pick the right stocks that complement it.
4. Diversification
There is no hard and fast rule regarding investing diversification. The core logic is that having a well-diversified investment portfolio reduces the chance of a hard loss. If some of your stocks do not perform well, you will still have other stocks that can offset the losses and keep your portfolio afloat. In other words, the greater your investment diversification, the lesser the financial risk connected with your investments.
Ready to invest in the stock market? With Tata Capital Moneyfy, you can easily invest in the best securities and mutual funds that will help you achieve your financial goals seamlessly. Get in touch with our financial experts, who will help you pick the right investments based on your goals, risk tolerance, and investing style. Start your investing journey today with the Moneyfy app.
You need to open a Dematerialised or Demat account and a trading account to invest in the share market. The Demat account holds your shares in electronic form, while the trading account facilitates the buying and selling of shares.
Making a short-term or a long-term investment depends on your unique financial goals and plans. Which is better for you requires careful consideration of your risk appetite, investment amount and the preferred period of investment.
Yes, you can invest Rs 100 in the share market. All you have to do is open a Demat and a trading account, identify a stock that can give you high returns and buy it.
To start investing in the share market, you need first to open a Demat and a trading account. After this, you need to log in to your trading account and select the stocks you want to buy. Next, specify the buying price. Once your transaction is complete, your shares will be reflected in your Demat account.
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28 September 2024
8 mins read
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