[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_title size=”1″ content_align=”left” style_type=”double dashed” sep_color=”” margin_top=”” margin_bottom=”” class=”” id=””]The ultimate cheat sheet on how to invest in share market[/fusion_title][fusion_text]
Investing in stock market would be one of the wisest decisions to make if one is looking for an extra source of income. In India the number of people investing in stock market is comparatively less. Off late many people are wanting to learn how to invest in stocks, but there is no proper guidance.This post would be the ultimate cheat sheet on how to invest in share market for beginners.
“The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money get rich.” -Charles Henry Dow.
Before jumping into the topic let us briefly understand the present scenario of Indian stock markets. Before investing in stocks you must know that in India there are two stock exchanges where the trading takes place. Bombay Stock Exchange(BSE) and National Stock Exchange(NSE), they are located in Mumbai and Delhi respectively. BSE is in existence since 1875 and NSE was founded in 1992 but trading was started in 1994. BSE and NSE both follow the same trade mechanism, trading hours, process of settlement etc. Among these two exchanges BSE is larger than NSE in terms of companies listed.
Now getting back to the topic how to invest in share market, this can be divided into two sections, 1) Getting educated to analyze the stocks to invest in and to understand the markets. 2) Opening up of necessary accounts to trade.
The reason why most of the people fail in stock market is because they are uneducated with regards to stock market and analysis. The first step to enter the stock market and start trading is to get educated with the help of stock market training sessions this would help you in the choosing the right stocks to buy.
This will help you to trade logically and take decisions based on analysis which would minimize your chances to incur losses by giving you a hint of the best stocks to buy. So the first step in investing in stocks in to get educated. Now let us take a look at the second part which is opening up of necessary accounts to start investing in stock market.
- Opening up of necessary accounts to trade.
After getting educated and having necessary knowledge to trade the next step which makes trading practically possible is opening up of accounts. There are three types of accounts which is necessary for every stock trader to invest in stocks, trading account, demat account and bank account.
- Trading account: – A trading account is similar to a bank account which is to be opened with the stock broker who is registered with the stock exchange. This trading account will help you to sell and buy shares in the stock exchange.
- Demat account: – Demat account stands for ‘dematerialized’ account, this helps the investor to hold the electronic certificates instead of holding physical certificates. When you buy/sell with the help of trading account, the share certificates are stored in the demat account in the dematerialized format.
- Bank account: – Bank account is linked to your trading account the monetary transaction between you and the exchange is carried out with the help of a bank account. There is no need to open a separate bank account you link you existing savings account.
These three accounts is a must have for every stock trader before investing in stock market.
Steps to open trading and demat account.
- Approach a stock broker who is registered with NSE or BSE.
- Fill the details in KYC form, this form would be provided by your broker.
- Attach your Identity proof and address proof.
- Produce your original PAN card at time of account opening.
- 6 months bank account statement of your existing account.
- A cancelled cheque of your existing bank account.
- 3 passport size photos.
Above were the steps to open the trading and demat account. Now these accounts can be opened with banks or specialized brokerage houses, both have their own benefits. Majority of the leading bank provide this facility to open the demat account with their banks, for e.g. ICICI bank has ICICI Direct, HDFC bank has HDFC securities. For beginners is it advisable to open an account with the banks itself to start investing in stock market as all the three accounts are maintained by bank so the process would become less tedious, the brokerage charge would be slightly higher than the specialized brokerage firms. For heavy or high volume traders they can open an account with the specialized brokerage houses, for e.g. Share khan, Motilal Oswal, Indiabulls securities etc.
Here you go! This is the stepping stone to begin your journey in the stock markets. Hope this cheat sheet gives you a clear idea of ‘How to invest in share market’, for any doubts and queries drop a comment below.