Today in here you will learn “How to Invest in Share Market?, How to invest in share market for beginners, how to invest in share market online, how to invest in share market in India, How to invest in share market online, And also What is an IPO and How to Invest in IPO in India.
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Why invest in the stock market? / Importance of investment:
You should invest money because when you invest money, that money works for you while you are busy with life, and you can take advantage of it in the future. So, investing is a means to a more joyful climax.
The purpose of investing is to put your money to work in various types of investments in the expectancies of increasing cash over time. Investing is the act of reserving money or capital to obtain an additional source of income or profit.
- Share Market or Stock Market is a market where shares of various companies are sold and bought.
- Here some people either earn a lot of money or lose their money.
- If you purchase shares of a company, you are a shareholder in that company.
Even if you are a newbie, investing in the share market is less complex. But, first, you have to create a Demat account To make money in the share market. There are two ways for this;
- The first way is to open a Demat account by going to a broker.
- The second way is to open your Demat account by going to the bank.
Our share money is kept in Demat account just like we keep our money in our bank account. If a company makes a profit, all the money you get will go to your Demat account. Your savings account and your Demat account are connected. If you want to transfer money from that Demat account to your bank account, you can quickly do it.
What is an IPO?
You have probably seen your friends get excited when they talk about IPO, but not everyone knows about IPO. The complete form of IPO is the Initial Public Offering. When a private company wants to grow its business, it requires many funds. So to acquire these funds, the company lists itself in BSE or NSE, presents its share to the public, and transforms into a public company. Initial Public Offering means a company providing its shares for the first time. As a result, IPO helps the company increase its market exposure and brand equity. In addition, companies may use an initial public offering to hire new workers, build structures, pay a debt, develop other companies or new technology.
How to invest in ipo in india?
To invest in IPO, you need things.
- Trading account (A trading account is for investing in the IPO online)
- Demat account (Demate account stores the shares in digital form)
- Bank account (Bank account required for making payment for the applied shares)
Many Brokerage firms or company that offers stock trading facility provide a trading account. You need an Aadhaar card, PAN card, address, and identity proof for opening demate account. In addition, you should link your mobile number to your bank account.
You can buy shares according to the lot size, and the lot size is the minimum amount of stake you can purchase. The prospectus of the company mentions it. In bid pricing, the upper limit of the bid price is the cap price, and the lowest limit is the floor price. When you receive stakes, they will come in your Demat account.
These are Two leading stock exchanges in India.
Bombay stock exchange (BSE)
National stock exchange (NSE)
The two types of share markets:
1. Primary share market.
2. Secondary share market.
Here a company gets registered to issue a certain amount of shares and raise money. After that, it is getting listed on a stock exchange. Investments in the primary share market are via an IPO (Initial Public Offering). After a company obtains all the applications made for an IPO by investors, they count applications. Then, based on demand and availability, they allot shares. To invest in primary and secondary markets, you should have a Demat account that will keep electronic copies of your claims.
Additionally, a trading account is also essential, which will assist in buying and selling shares online. In rare cases, it is also imaginable for traders to apply directly from their bank account. IPO application via net banking is made easy through a process known as ASBA (Application Supported by Blocked Amount).
As per the ASBA method, if one applies for shares worth ₹1 lakh, they will block these funds into their bank account instead of being sent to the company. Once you obtain your quota of shares, the exact amount will be debited, with the balance released. All applications for IPOs are required to follow this protocol. Once the company allots shares to traders, the stock exchange lists them, and you can start trading them within a few days.
A secondary share market or aftermarket is for the regular purchase and sale of previously issued financial instruments such as shares, bonds, and options. There are a few easy steps to follow to invest in this share market.
How to open Demat account:
Step 1: Demat & trading account:
- Opening a Demat and trading account is the next step once you have chosen a broker (individual, company, or online platform).
- Opening a Demat and trading account is the starting point to invest in the secondary market.
- However, you should link these accounts to a bank account you already have for the transaction.
- A Demat account is where you digitally store the stocks/shares, like an online portfolio of your claims.
- In addition to the Demat account, you also need a trading account. It facilitates buying and selling of shares.
Register for UIN :
- If you’re a beginner, then a Unique Identification Number is unnecessary.
- However, you can register for it later when you choose to go big on your trades.
- Suppose you are looking to trade shares worth over 1,00,000 rupees at a single time. In that case, you need a Unique Identification Number (UIN).
- You can ask your broker to get you the Unique Identification Number.
Now that you’ve set up everything, it’s time to start trading. However, before you carry out your first trade, you need to understand the basics of how it works:
- Sign in to your trading account and choose the shares you wish to sell or buy.
- Ensure that you have the requisite funds in your account to purchase those shares. The stakes are purchased based on your instructions and reflected in your Demat account. The same applies to selling as well.
- You set up instructions with your broker.
Note that generally, buy and sell orders you set up are valid only for a specific period – say one day. However, suppose the stock doesn’t reach your desired purchase/selling price during this period. In that case, It will automatically cancel the order, and you have to place a new order again.
Step 3: Buying & Selling:
Choose the price at which you like to buy or sell a share. Then, wait for the buyer or seller.
Step 4: Transaction:
After completing the transaction, you obtain either shares or money for the stocks you have bought or sold. Confirm that you are aware of the duration you stay invested and the financial goals you wish to accomplish via your investments.
Documents required to open demat and Trading Account:
To start investing in this market, you need to have the following documents:
- PAN Card
- Aadhaar Card
- Photo of the applicant (Passport-sized).
- IFSC Code, account number, Account holder’s name, and signature.
- Documents detailing that show the applicant earns a steady income.
- Address proof based on the list of documents.
What to do before you invest:
Although share marketing isn’t as hard as it seems, it is imaginable to be swept away by the world of trading without being cited by it in the long term. To control this result, keep the following points in mind before investing.
Portfolio management:
What is portfolio and what is portfolio management:
A diverse portfolio is a beneficial portfolio. Suppose a particular asset class dominates your portfolio. In that case, it will not offer a constant stream of funds your way when that instrument is going through a low patch. Financial consultants recommend adding alternative asset classes to offset the low periods of one asset class. For instance, bonds or other debt instruments are often with equity. This balance in your portfolio can secure you against a period of market crisis.
Know your investor profile:
Your investor profile can show the kind of instruments best suited to your risk desire. In addition, it allows you to ensure that you are taking on the amount of risk best suited to your lifestyle.
Create an investment plan:
You can bypass potential pitfalls down the line if you have an investment plan that displays the amount of revenue you desire to earn from your investments. Besides the time horizon, you potentially need to remain invested in making that amount.
Types of investments in the Stock Market:
- Stocks Bonds
- Mutual Fund
- Derivatives
- Currencies
- Future & Options
- Commodities
Conclusion:
When investing in the share market, you should consider essential things. These include planning your investments, understanding your risk appetite, and ensuring you go for diversity in your portfolio. As you can notice, investing in the stock market is not that tricky. However, choosing the right broker is crucial, as the broker plays a vital role in helping you trade. If you have not started investing in the stock market, we hope this guide enables you to get started. So guys, if you want to invest in the share market, you can take advantage of this guide.
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