You’ve probably heard that stocks can make you very rich very quick. While we will not downplay the high amount of risk that stock investing involves, there is some truth to it. Careful, well-researched and a strategic approach to stock investing for the long term has the potential to help you accumulate wealth. So how to buy stocks in India?
If you are ready to jump into the ring, this article will take you through how to buy shares online to add to your portfolio.
This article covers:
- Why invest in the stock market?
- What to consider when investing in the stock market?
- Requirements to invest in the stock market
- Steps to invest in the stock market
Why invest in the stock market?
But, trading stocks, i.e buying/selling shares and securities are not as easy as it appears. It involves complex planning and a strategy suitable to your risk profile. Let us find out in detail all factors to be kept in mind while investing.
What to consider when investing in the stock market?
What kind of investor are you?
Define your investment objectives. This will further dictate the quantum of funds you wish to invest, how long you want to stay invested, and how is your risk appetite.
Don’t put all your eggs in one basket
Risk is inherent when investing in the stock market. To manage this risk, you must diversify your investments and invest only after thoroughly understanding the instrument and related risk.
Do your research
It is very important to research the companies you are investing in and not just rely on market experts and emotions. For this, you will have to keep your ear to the ground regarding every financial, economical, and political news in the country.
You can use the Tickertape Screener for your research and at the same time plan for the Muhurat Trading session, which is considered an auspicious time on Diwali when the stock market is open for one hour.
Requirements to invest in the stock market
All investors must have a Permanent Account Number (PAN Card). It is a unique ten-digit alphanumeric code, assigned to all individuals, which the tax authorities use to assess a person’s tax liabilities.
The next thing you need for trading is a dematerialized or demat account. This is a digital account where you can hold your shares, in your name, in a non-physical or dematerialized form.
Most banks and financial intermediaries offer the service of opening a demat account. Today, a demat account can be opened in less than 10 mins, thanks to various digital brokerages and technological advancements.
To buy and sell shares, you will need a trading account held with a stockbroker. Investors cannot directly deal with the stock exchanges where the actual stock trade happens. This is where stock brokers come into the picture. Stockbrokers are registered on either BSE or NSE or both and offer numerous types of services to buy and sell shares. They are licensed by SEBI and can be online platforms or individuals.
A bank account needs to be linked to your trading account to ensure that money can flow in and out when you buy or sell shares.
There are two share depositories in India – the NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) – that act as storage houses for the stock market shares. They use their Depository Participants to release shares to you when you buy them. This participant can be a financial institution, broker or other entity.
Steps to invest in the stock market
Once you meet these requirements, trading on the stock market becomes relatively easy. Here are the steps to follow:
- Log into your trading account
- Choose the shares you want to buy and decide the quantity and price
- Allocate enough funds in your trading account to ensure you have the money to buy the quantity of shares
- Watch the stock price movement and place your ‘buy’ order when you find the price within your comfort levels
The money would get blocked from your trading account and be transferred to your broker once the trade is completed. Note that delivery of shares to your demat account may take up to three days – (trading day plus two days) – to complete.
While you may effect an opposite order and sell your shares, holding on to shares for the long term generally results in better returns if the fundamentals of the stock were good in the first place.
Investing in the stock market is considered attractive because of the possibility of high returns, although it also comes with high risk. To properly and safely invest in the stock market, you must educate yourself of all the risks and plan your investment in accordance.
Buying stock online is fairly simple and straightforward, made even easier by new-age enterprises and mobile applications. You may require to commit to some paperwork depending on the brokerage you choose. Reach out to your financial advisor before investing.
- What Is SWP in Mutual Funds? - Dec 6, 2021
- EPF Interest Rate: Overview, Calculation, Tax Rules and Components - Dec 6, 2021
- What Is Stock Split – Meaning, Features, Types and Limitations - Dec 6, 2021