The stock market could be an attractive and lucrative avenue, given its return potential. However, the market is a multilayered platform, and unless you understand the basics, investing in it can be challenging. Therefore, here’s a quick lowdown on how to invest in the stock as a beginner.
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What is a stock market?
The stock market is where the stocks of a company are listed and traded between investors. Traders interact with each other on the stock market to buy and sell shares. It is a formally established marketplace governed and regulated by the Securities and Exchange Board of India (SEBI).
What are shares and stocks?
Before you trade in the stock market, understand what shares are. Shares are a type of paper security that are issued by companies looking to raise capital. Each share represents a part of the ownership of a company. When investors invest in shares, they invest in the company and become its shareholders. If the company grows, the value of the shares grows, and investors make a profit. Moreover, if the company earns a profit, it distributes a part of it among its shareholders as dividends. A stock, on the other hand, is the total number of shares into which the ownership of a particular company is divided.
How to invest as a beginner?
To begin your journey of investing in shares, you need a stockbroker since trading can be done only through a broker. You would have to submit the following documents to register yourself as an investor:
- PAN
- Aadhaar card
- Address and income proof
- Cancelled cheque of your bank account
- Passport-size photographs
Moreover, you should fill and submit an online application form with the broker, bank, or depository participant (DP).
How to invest in stocks for beginners?
- Demat account
A demat account is where all your shares are stored in electronic form rather than in physical form. As per SEBI guidelines, it is mandatory for investors to have a demat account before they begin investing. You can open a demat account with a bank, DP or a broker. - Trading account
A trading account is an account through which you can place orders to buy or sell shares. The shares you buy are stored in the demat account, while those you sell would be taken out from the same. - Linked bank account
You need a bank account that is linked with the above accounts. When you buy shares, money would be debited, and when you sell, money would be deposited in the linked bank account.
How to buy shares for beginners?
There are two types of share markets to buy shares.
- Primary share market
Initial public offers (IPOs) are listed in the primary share market. - Secondary share market
Shares that are already listed on the stock exchange can be bought and sold through the secondary share market.
Beginner’s guide to investing in the stock market
Before you start investing in stock market, it is essential that you develop a sound knowledge of the market so that your investments work the way you want them to. Another way to approach investing is by seeking expert help. You can explore your options through an expert who will curate investment plans that are better aligned with your financial objectives, investment horizon and appetite for risk.
Reach out to one today and get started on your investment journey.