“The Wolf of Wall Street”, “Bazaar” and “Scam 1992”, we don’t know much about the performance on the big screen, but the credit for sparking People’s interest in the share market definitely goes to these. Today, everyone knows what the share market is, what are stocks, and how are they connected to our life. But, do they know how to start investing in the share market? Of course, they don’t. And, one of the biggest reasons why people are afraid of investing in the stock market is that it’s too complicated.
A disclaimer said “share market investments are subject to market risk. Please read the offer document carefully before investing” The newbies in the share market often take this statement seriously and that’s what holds them back from getting rich. If you just dream about it and never take your hands on real trading, stress not. This step-by-step guide will teach you how to start investing in the share market.
Before diving into actual trading, here are some basics of the stock market that we want you to know!
Beginner’s Guide: Basic Tips for Investing in Shares
Here’s how you can get started and overcome the basic challenges of the share market.
Run Your Research
It is essential to know everything about the stock market by running tough research before jumping into actual trading. You can search about how the stock market functions and its basic terms. It will help you set your limits until you become a master in investment. You can either read online or do your research through newspapers. Simply start with reading success stories of leaders in the share market or do a brief analysis of top stocks’ transformation. It will help you pick the best stocks to invest in.
Set Your Investment Goals
Before issuing cheques to different stocks in the market, you must set your investment goals and the time in which you want to accomplish these goals. Mark your goals with your major responsibilities such as child’s education, daughter’s marriage, a house, or a retirement saving plan, along with a deadline to reach them. All this will encourage you to do smart investing and achieve results within your timeline.
Know Your Risk Capacity
If you are aware of the gains, you must be aware of the risks associated with the share market. But, if you are financially stable, you can bear a few risks as well. While, if you are the bread earners in the family, it will be a little hard to play with risks while making an investment. Therefore, it’s better to choose your stocks wisely and invest as per your risk appetite.
Right to Invest and Exit
It is extremely necessary to know this but unfortunately, there’s nothing right or wrong about investing in the share market. Both investing and exiting from the share market solely depends on your planning and homework that you do before starting investing. Your knowledge of decoding the market trends and overcoming challenges is what will sail you through the ocean.
Though the share market has hundreds of thousands of daunting stories, with a basic knowledge of the share market, you can side the risk factors and gain profit.
If you are a beginner in the share market, here’s a detailed guide for you to learn how to start investing in the share market.
- Apply for a PAN card, if you don’t have one yet
It is essential for all Indian citizens to carry out Permanent Account Number (PAN) into any financial transaction like filing ITR, opening a bank account, and mutual fund investment, etc. It is simply a 10-digit alphanumeric code provided to each individual by the Income Tax Department.
PAN Card is a must to start investing in the share market, so if you don’t have one, you better apply for it now. You can register for a PAN card here.
- Get a Stock Broker
You will always need a stockbroker until you join the game full time. See, not everyone can buy or sell stocks in the national stock exchange like the BSE and NSE. That’s why you will need intermediates called brokers.
A stockbroker is an authorized individual/company affiliated with the SEBI (Securities and Exchanges Board of India). These companies or individuals are authorized to buy/sell stocks in the share market. You can choose a broker, whom you can trust or can partner with an online broking firm.
- Set up Demat and Trading Accounts
Once you have picked a broker – whether individual or brokerage firm – you will require opening a Demat or trading account.
Understand it in simple words: Demat account holds stocks/shares in your name. Yes, you can consider it your online portfolio. All the shares that you buy in the market are held in your name and the stocks that are sold will be removed from your Demat account. If you wonder how to set up Demat and trading accounts, your stockbroker will help you set up one.
- Understand the Role & Responsibility of the Participant
Apart from the Demat and Trading account, there are several terms that you need to be aware of before starting investing in the share market. This is called depository participant and there are two types of depositories in India.
- NSDL – National Securities Depository Limited
- CDSL – Central Depository Services Limited
Both provide depository participants to hold the shares. Although it sounds similar to your Demat account, it’s different. The Demat holds the shares you own, the trading account shows the buying/selling that has taken place in your accounts, while the depository holds both the stocks you purchased and sold.
- Register for UIN
If you have no plans for joining the share market professionally in the near future then you don’t need this one but if you are planning to take a big leap of shares worth INR 1,00,000 at once, you will need a UIN (Unique Identification Number). However, we have marked this optional on the list.
- Finally, You’re Ready to be The Wolf of The Dalal Street
Now, you’ve set up everything but you’re still not ready to compete with the market leaders. So, here are some basics of h0w the share market functions.
Let’s assume that you want to purchase 10 shares of Reliance Industries Ltd when it reaches Rs. 7,000, you’ll need to notify your broker. Once you inform, your broker will set an alert and buy stocks in your name when the price will reach the limit.
Note; the buying and selling orders are valid for a specific period – assume one day. So, if the stocks don’t reach the price limit in 24 hours, then the order will be canceled and you’ll have to place a new order again.
Final Words;
As the blog says, investing in the stock market is not complicated at all. You just need to do your research, set up your limit, choose a stockbroker and he will help you throughout the journey. As you can see the stockbroker plays a vital role in trading, so you better choose the one whom you can trust.
