How to Invest in Share Market?

Share market investments have gained momentum in recent years, especially after the digital boom and participation of online brokerage companies. The handsome returns earned in the stock market have lured millions of Indians recently, especially the youth.

For decades, Indians have shied away from participating in the stock market, considering it a gamble. The stigma, however, now seems to be dismissed, as thousands open a Demat every day.

If you are looking to enter the share market afresh and wondering how to invest in the share market, you have landed on the perfect page.

One need not have extensive knowledge about the share markets and start his journey simply by opening a Demat and trading A/c. It will take just a few minutes to build your Demat and Trading A/c and start investing.

What does the Share Market Mean?

In a share market, stocks/shares/securities are bought and sold. Securities are financial instruments that have a value associated with them.

The share market, also known as the stock market, is a regulatory back where all companies are listed. Investors can buy a share in a company of their choice. You can not only buy and sell shares, but you can also trade on various shares and assets in the stock market.

Why invest in stocks?

Potential to earn High Returns -

One of the reasons to invest in stocks is to take advantage of the high return potential in the long run. Stock investment helps an individual to make considerable profits.

Earn passive income -

Multiple companies pay a portion of their profits and pay a dividend to their investors. Hence, by investing in dividend-paying stocks, one creates a passive source of income.

Diversifying Portfolio -

By Investing in stocks, debt, and equity, you can build a diversified portfolio across various industries. It will also decrease your overall risk profile while improving returns simultaneously.

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How to Invest in Stocks?

For years, stock market investments have proven to be rewarding and have only grown with time. Investing in the share market requires following a few simple steps.

Let's help you understand these steps in detail so that you are all set you kickstart your investment journey.

The key and initial steps are opening a Demat & Trading account.

  1. You need to choose a broking platform like Bajaj Financial Securities Limited and open a Demat & Trading account to start investing.
  2. You will also need a Bank Account linked to your Demat & Trading A/c to add and withdraw funds. The next step would be select shares that you to invest in. For trading, you need sufficient funds in your Demat account to buy shares.
  3. You select the price point you want to buy or sell a share. Wait for the seller/buyer to reciprocate that request.
  4. Once the transaction is complete, you either get shares or money for the stocks you bought or sold.

Investment Process

The process of investing requires only a few clicks through online platforms. You can invest from your phone, laptop, PC, etc. Investing means buying stocks and holding them for your desired time till you achieve your target.

An investor will select the stock of their choice and decide the stock quantity. Once ready, they will put a buy order on the exchange/market.

When you place an order with a broker, they will execute it on your behalf, the amount will be deducted from your Demat & Trading account.

The shares will reflect in your Demat A/c within two days of the transaction.

Investing in the Primary Market through Initial Public Offerings (IPOs)

Investing in the primary market or IPO is when you invest in a company or its share before they list in exchanges. A company goes public when it requires to raise money for business expansion. An IPO provides a unique opportunity for retail investors to buy shares at a discounted price.

You need a Demat & Trading account with a stockbroker to apply for any IPO. Once the IPO date is announced, you can apply through your Demat & Trading.

The amount required for any IPO is between Rs. 14000 to Rs. 15000. IPO allotment happens through a lottery system. In the case of share allotment, they get electronically delivered to their Demat accounts.

Investors can sell the shares once they list in the share market to earn probable profit in the IPO. They can also hold on to their investment for as long as they want.

Investing in the Secondary Market

The secondary market is nothing but the stock market. Once the shares are listed on the stock exchange, investors can buy and sell those stocks or in other words trade on those stocks. Investing in the secondary market is analyzing the stock that you want to purchase. While analyzing you need to keep a check on past performances, growth potential in the future, and company financials among several other factors. This type of analysis is popularly known as Fundamental Analysis. Investors buy potential stocks and hold on to their investments till their desired target is achieved. The secondary market not only offers simple buying and selling of stocks it also offers other options like intraday trading, derivatives trading, etc.

The only thing you require to invest in both primary and secondary markets is a Demat & Trading A/c, and you can start investing in a few minutes.

Things to Keep in Mind Before Investing in Stock Market

There are several factors that you should consider before you start investing. Investing is putting your hard-earned money into an asset, and it will always be wise to do your due diligence before you invest. Let us understand a few factors that you should consider before you invest.

  • Portfolio Diversification- Keeping your portfolio diversified is a healthy thing to do. If your portfolio is dominated by a particular asset class, you continue to have a steady flow of funds even when the instrument goes through a rough patch. To offset the low phase of one asset class, financial advisors suggest adding alternative asset classes.
  • Understanding the type of your investor profile – Your profile can reveal the kind of instruments that will suit your risk appetite. By doing this, you know whether the amount of risk you take will suit your lifestyle or not.
  • Make an investment plan – You could avoid the potential risk in the future if you have chalked out an investment plan. The same should include the returns you want to earn from your investments. Have a deadline set and invest consistently for that period.

Conclusion

Investing has the power to bring in a better financial future. With a little effort and consistent investments, you can achieve your desired target. Investing is an empowerment tool that almost anyone can use to elevate the standard of their financial status.

Open Demat & Trading Account

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Frequently Asked Questions (FAQs)

There isn’t a minimum limit. Starting from a few thousand, you can go up to lakhs or even crores. Your investment capability is directly related to your ability to take a risk.

You should invest a decent sum of around Rs.10,000 as a beginner. As and when you gain experience in the market and with further confidence, you could gradually increase your amount.

Your PAN and Aadhar Card details with your bank details are the required documents for opening a Demat Account.

Keep a tab on the stocks that are performing well, especially stocks that are showing upward trends should be your target.

You first need to have a brokerage account to buy stocks. Once the money is added to the account, you may find, select and invest in separate companies.

Stocks should be bought when there is an upward movement in their prices. Technical traders utilize different indicators and charts for gauging the market. The basis of that, they take their position in the market.

Companies sell stocks to raise capital from the market. When the stock prices of a company are going up, you could earn profit by selling these stocks at a higher price. Also, when companies declare dividends, you could earn profit from that.

Once you sell certain stocks, the brokers settle them on your behalf. It could take a day or two for the amount to reflect in your DEMAT account. You may choose to withdraw once you receive the amount in your account.

Stocks/shares, Bonds, Derivatives, and Mutual Funds are the daily traded financial instruments in the stock market.

Several websites serve to be great sources to remain updated with your daily dose of market news. You can also get updates from your broker.

In 2001, SEBI banned short-selling. Only institutional investors and Mutual Funds are allowed to short-sell now.

A market is a bull when the prices are rising along with a growth in investor confidence. When economic trends are strong, they reflect a higher growth potential, a similar pattern can be seen in the stock market too. There’s growth anticipation amongst investors and therefore, investment is buoyant. However, in the case of a bear market, the scenario is the opposite. Slower Economic growth is this scenario case, and the industry performs poorly which is seen in submissive investor.