How to start investing in stock market in India

When we invest our money we put our money into work in the hope that someday it will give us a massive return and we can retire happily. If you want to invest in gold simply you can go to the jewelry shop and buy it from there and invest in real estate you need too much document work which is doesn't required in the stock market. Many people who want to enter the stock market think that it is too confusing. But believe me, once you will open the Demat account you can easily buy or sell your shares with just one click. So today's article is for those people who want to start investing in the stock market but don't know the procedure. 

If you want to trade stocks you need to go to the stockbrokers which are registered by SEBI (Security and Exchange Board of India). Because you can't trade stocks directly on stock exchanges (Stock exchange is the place where stocks are used to buy or sell between the investors).

Types of market

There are two types of market in India;

1. Primary market

When companies list in the stock market they launch their IPO (Initial Public Offering) to sell their partnership to the public. In simple words, the primary market is the place where financial securities like bonds and shares are created and sold to the investors. Because it is the first time stocks list is the market so its price is fixed. In the primary market companies directly sell their securities to investors rather than the shares traded between the investors.

2. Secondary market

Once the securities have been created and sold to the public then it is obvious that the company won't buy its stocks back. So these stocks are traded between the investors on the stock exchange. This is called a secondary market. The price of stocks doesn't fix in the secondary market as the stocks are traded between the investors so it all depends upon demand and supply.

How to start investing in the stock market

You want to invest in stocks right but you don't know the procedure. In earlier days when the Demat account doesn't exist the stocks are used to trade offline. Investors were got their shares in certificate form. But now all the process is online and very convenient. So I will tell you the simple steps you can follow and start investing in stocks.

1. Setup your goals

The first thing you have to do before you start investing in stocks is decided what are your goals what is your financial plan. I am telling you to make a financial plan because a plan and a goal will encourage you to earn good returns and make you eager for returns every time and it will also help you to find out how much time you need to invest in the stock market to achieve your goal. See if you want to enter the stock market with a short-term perspective then you can please change your mind to invest in the stock market you can go with the liquid funds. Because the stock market is very volatile maybe you enter the stock market with the 1-2 year perspective then you may have to bear losses. Yes, you can invest in the stock market from the long-term perspective. Long time perspective means at least 5 years because the compounding starts reflecting its magic in long term. You may have listen that Warren buffet has earned 95% of his wealth after the age of 60. 

2. complete your documents

You know what if you want to invest in the stock market you have to open up a Demat account in which your stocks will be stored in electronic form. And to open a Demat account you will need some documents which are mandatory for KYC (Know Your Customer). These are the following documents;

1. Identity proof -  To open a  saving account and Demat account you need to have an identity card like aadhar, voter Id card.

2. Address Proof - You will need address proof to open up a saving account and Demat account. You can use your ration card, voter Id, or aadhar.

3. Income proof - Income proof is required if you want to trade in derivatives and commodities.

4. Proof of bank account -  Proof of bank account is required to open a Demat account. You can submit a canceled cheque or 6 months bank statement.

5. PAN card - A pan card is mandatory to open a Demat account and trading account.

6. Photographs - You will need 2-3 passport size photographs to open a Demat account.

3. Open a saving, trading, and Demat account

Having these three accounts is mandatory if you want to invest in the stock market. First, open a savings account in any bank, then you need to open a trading account which you can open with any stockbroker and you will get a Demat account as well with the trading account. These all accounts are interconnected with each other. If you want to buy a share first you need to transfer funds from your savings account to the trading account so that you can buy or sell the stocks. Then you will need to place your order to the stockbroker and when they will buy the stocks it will be transferred to your Demat account. A demat account is used to store the stocks just like the saving account used to store your funds.

Read here ; How the stock market works?

4. Identify the stocks 

Now when you have opened the Demat account you will need to identify the stocks according to your need. Ask yourself how much risk can you take to generate returns. In the stock market, it is obvious that the higher the risk the maximum the returns. But it doesn't mean that you will start taking risks without analyzing the stocks. As I told you to make a financial plan that will help you to decide that how much risk you have to take to earn the returns to achieve your goal. Make a diversified portfolio of different sector stocks with diversified risk. If you cannot do this by yourself you can go for a financial advisor who will help you to find the best fundamentals stocks according to the risk. But if I suggest you if you want to earn only up to 15% you can go with large-cap companies that are in Nifty 50 like HDFC bank, Bajaj finance, and many more. Here am not telling you to buy these stocks am just suggesting to you that there are many good fundamental stocks are present in the market that has risk.

Read here ; How to choose your first stock?

5. Keep your eye on your portfolio.

Keep your eye regular on your portfolio and market. Any bad news about a specific company can result in a sudden fall down in the price of the company's stock and you will have to bear losses. Similarly, any good news about a company will result in a temporary rise in the stock of that company you can book your profit at that time by selling that stock. Having an idea that what is going on in the market will give you many opportunities. When you will think that this particular stock will not go up from this particular price you can book your profit by selling it and you can buy it again when the price will fall down.

If you want to earn consistently in the stock market and minimize the losses you can go for this book. I have personally read this book and believe me guys it is quite good, you will learn too much from this book about the stock market.

 

The Bottom line...

You can start investing in the stock market by just following these simple 5 steps. You can open your Demat account at any stockbroker there are many discount brokers present in the market like Zerodha, angel broking, 5 paise, etc. If you have any queries regarding this you can comment below or message me personally in the contact form.