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!
Invest in Share Market
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 stock 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!
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.
Get a PAN Card
The first and foremost step you need to take in order to invest in 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. Apart from that, there are specific documents needed to open a Demat account. Make sure you understand these specifics and then go ahead with the Demat Account opening process.
Furthermore, there are minor age users (especially students) who always have this query on whether they can open a Demat Account since they generally do not have a PAN Card. The answer to that is clearly mentioned in this review on Whether Minors can Open a Demat Account.
Find a StockBroker
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.
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.
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 do’s and don’ts you need to be aware of:
Do’s & Don’ts of 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.