Thousands of users want to step-up their investment plans and invest in the share market. However, a very few actually understand the basics about how to invest in share market before putting their feet into the ocean of stock trading. Generally, they start trading out of curiosity or just because some friend or relative of theirs is doing it.
The worst part is they think they will be making profits right from Day 1!
How to Invest in Share Market Online
You might have heard a lot of your friends, relatives and acquaintances say:
“Stock Market Trading is very Complex”,
“Share Market Trading is Gambling”,
“It is stupid to invest in share market, it’s a complete loss!”.
Well, yes, for people who do not have much of an understanding and actually do not understand even the basics of share market investment, will say the same things no matter what.
And from their perspective, it is correct as well. Human beings have the tendency to rule out things which they deem different, tough or relatively complex.
Obviously, you cannot understand the way exchanges and indices work. But, you can certainly have a clear understanding of the fundamentals of the concept, so that if you try your hand at it, you don’t feel stupid or out of place!
5 Steps on How to Invest In Share Market in India
Now, without any further ado, let’s jump to the meat of this review piece and understand how you can ready yourself in order to invest in the share market.
1. Get a PAN Card
The first and foremost step you need to take in order to invest in the share market is getting a PAN Card. It is a mandatory document before you get started with anything related to the stock market. In order to open a Demat Account, you need to have a PAN Card in your name.
Once your documentation is ready, you need to find a suitable stockbroker for yourself.
Again, different users have different preferences and requirements from a broker and there are multiple things that you need to consider before pinning down to the most suitable stockbroker for yourself.
Make sure to perform basic research before selecting a stockbroker for yourself. Furthermore, you may use this stockbroker suggestion service as well. Then you can go ahead and open Demat account for yourself.
3. Set your Investment Goals & Objectives
How about I put you on a boat and say “Sail!”. What will you say?
One certainly needs to know the direction or the specific objective of a particular task in order to get started. Otherwise, it’s going to be an aimless journey, which obviously does not make any sense. There are high chances that this journey will end up in a huge waste of time and money.
Thus, before you get started with trading in the stock market and invest in the share market, you need to figure out:
If you are trading on your own, then you may choose to use any of the trading platforms (across mobile, laptop or desktop).
In this case, you must ideally be performing some level of analysis (at a fundamental or technical level) and then you can choose to place the order directly from the software itself.
However, in case you choose to use the call and trade facility, then post some analysis or after a recommendation of a financial expert, you need to place a call to the service team of your stockbroker.
To use this method, you don’t need to be averse to the technicalities of a trading platform.
However, if the call does not get through at the right time or the broker is not able to place the order for you at the right price, then you may lose out on the potential profit-making opportunity.
Be wary of both sides of the coin and based on that, you can plan to trade on the stock market accordingly.
5. Learn from your Trading Mistakes
Be you are a beginner level trader or a Warren Buffet, you are bound to make mistakes in your investment decisions.
However, the ones who go further in their trading journey are the ones who accept these mistakes and learn from them. Once you know that a specific strategy does not work for a specific market situation, that is first-hand knowledge for you.
Some of the common trading mistakes made when you invest in the share market are:
Trading with no market understanding
Following others, blindly
Not following stop loss and target price rules
No exit plan
Primary and Secondary Market
Another basic you need to be aware of before you invest in the share market is that there are 2 types of share market – Primary & Secondary.
When a company is looking to get listed on the share market, they generally go through the IPO (Initial Public Offering) route where retail traders are allowed to bid for the shares open for allocation.
The companies listed in the share market allow traders to buy and sell on the secondary market. This market opens 5 days a week for around 7 hours a day.
Before we wrap up this piece on how to invest in Share Market, let’s quickly look at some of the dos and don’ts you need to be aware of:
Do’s & Don’ts of Share Trading:
Here is a quick look at some of the dos and don’ts you must consider while you perform online share trading:
Read the POA (Power of Attorney) document thoroughly and sign at specific spaces. Don’t just blindly sign on everything provided.
Always get contract notes from your broker and insist in case, the broker fails to provide these notes to you in the first place.
Understand all kinds of brokerage and taxes related to trading with a stockbroker of your choice, otherwise, you might feel cheated later. You can also use this brokerage calculator for a complete understanding of all kinds of charges.
In case you feel cheated by your broker, don’t be afraid and get in touch with the compliance officer of the broker. If it still does not help, feel free to raise your complaint against the broker at SEBI. You can also get in touch with us in case your stockbroker is a fraud.
Check the registration numbers of the broker with different exchanges and validate those membership IDs at the respective websites of those exchanges.
A lot of spam companies have recently started sending out SMS messages in the names of prominent stockbrokers. Beginner level traders generally get cheated much easily through such scams and lose out on their hard-earned money.
Stockbrokers provide research to their clients on a regular basis across trading segments. Make sure to perform some sort of analysis on top of what you get from your broker before blindly trusting on such research reports.
Monitor the stocks that you have bought from the share market on a regular basis. It is important to know when is the right time to hold, buy or exit and thus, monitoring your portfolio is an important exercise.
Generally speaking, there is no way you can invest in share market without the help of a stockbroker. You’d need to open up a Demat account first for you to place your feet in the stock market trading arena!
However, if you are looking to invest in a few selected companies, then you have the option to go ahead with DSPP.
Now, what does a DSPP mean?
DSPP is abbreviated for Direct Stock Purchase plan where you get in touch with a company through an agent (not a stockbroker) and place a request to purchase stocks directly.
Having said that, this cannot be seen as general stock market trading and more like trying to get a stake in a business.
How To Invest In Share Market For Long Term?
Well, this one is simple!
In order to invest in share market for long term, you’d need to perform a detailed fundamental analysis of stocks. This will help you in understanding the business proposition, its history and performance in the industry overall.
With this knowledge, you will be in a better position to decide whether you’d be interested in keeping your money locked in for shares of this very company for long-term, say 5-10 years or more.
There are multiple fundamental analysis apps out there that you can use, however, your mobile trading app will also have sufficient information about it for various listed companies.
Do not invest in a stock for long-term that you are not sure of and have not performed any sort of analysis of.
In order to invest in share market, you can use multiple trading apps. Most of these trading apps are provided by your stockbroker.
Some of the features these apps contain are:
Market Watch lists
Make sure you take a detailed demo of a mobile trading app before using. This demo will assist you in understanding what all you can do with the app and learn how to invest in share market.
Invest in Share Market FAQs
Let’s discuss some of the frequently asked questions about how to invest in share market. These questions are asked by all kinds of traders and answers to these are not generally available in the public domain:
How to invest in share market without a Demat account?
Well, Demat account is almost a necessity if you are looking to invest in the share market. For instance, if you are looking to open a fixed deposit with a bank, you are required to open a bank account with the same bank first.
Having said that, if you are into intraday trading ONLY, in that particular case, since you will not be taking the delivery of the trades, then you will not really need a Demat account for that.
All the transactions will then happen through your trading account and Demat account will not be needed in that case.
How to invest in share market without PAN Card?
PAN Card is a 100% mandate as long as you are looking to invest in the share market. There cannot be any deviation from this rule whatsoever.
A few minor users (aged below 18) sometimes ask how they can trade in the share market as they do not have any PAN card yet. In such cases, they can open a minor Demat account with the help of their parents or guardians.
Once they reach the age of 18, then they can re-initiate the process of Demat account opening and open a new Demat account with their own PAN card.
How to invest in share market without risk?
That is like saying, how to eat a sweet without adding any sugary ingredient.
The stock market is known to provide higher returns as compared to other forms of investing such as fixed deposits, bonds etc. In order to attain higher returns, you NEED to add the risk element to the investment class.
Having said that, it makes total sense to perform your analysis before investing in any segment. By doing so, you will only be mitigating your risk from your investments.
How to invest in share market without knowledge?
Is that really a question? We are talking about investing our hard-earned capital somewhere. That MUST NOT be done without knowing about the implications of the choices made.
For instance, if you are looking to buy a mobile phone, do you take that decision without understanding the features and the value it provides for the corresponding cost?
Similarly, if you are looking to buy shares or stocks of a company in lieu of your money, wouldn’t you want to know about the company you are looking to buy shares of.
However, in case you are looking to invest in share market without knowledge, the best way is to take professional investment help or go for portfolio management services. With that arrangement, you will have to pay relatively more but you won’t really need to gain knowledge of stock market investments.
How to invest 1000 rupees in share market?
First of all, you need to know that yes, you can invest INR 1000 in the share market.
It’d, however, be depending on whether you are looking enter and exit the market with your trade within the same day or you are looking to invest it for once and observe for a few days.
Nonetheless, as far as stock selection is concerned, you’d be looking at the stocks that are currently trading at less than INR 1000 per share.
Let’s say you invest in a stock FPP that is currently trading at a market price of INR 180. Thus, you can buy 5 shares worth INR 900 of this company with your INR 1000 investment.
You might have to pay brokerage charges, taxes, stamp duty and other related costs, so you can keep the rest of the amount for these charges.
Now, depending on how the stock moves ahead in the market, you can take a call when to sell it off.
How much money do you need to invest in the share market?
There is no specific amount that one can tell you that you’d need to invest in the share market to get started.
Some people start with as low as INR 1000 while there are a few who go ahead and buy shares of companies in the range of INR 50,000.
However, for a reasonable and objective understanding of your investment returns, you are recommended to invest an amount of INR 10,000 at least.
Rest, it depends on your budget and risk appetite.
How to invest in the share market for the long term?
With this form of analysis, you’d be able to figure out the specific sectors and stocks that can go with your investment aspirations. You can decide to further filter and select only a few stocks (or even trading segments) in order to be confident while investing.