November 16, 2019
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Finance

How to invest in share market

Investing in the stock market can be a fascinating journey. How to invest in share market is a skill that can be acquired with time, experience and knowledge.

To invest in the share market, you need to look into the following aspects:

  • Get a PAN card: To execute any financial transaction in the Indian stock market, it is compulsory to have a PAN card. Ensure that you have an error-free PAN card as your first step towards investing in the stock market.
  • Enrol with a stockbroker: The stock market has specific guidelines on how it conducts its financial transactions. Authorised stockbrokers such as Kotak Securities can execute buying and selling of shares. A good stockbroker will also assist you in buying stocks and enhancing your knowledge through crucial stock information tips and instructions.
  • Demat and trading account: A Demat and trading account with a stockbroker is an essential factor of trading in the stock market. Shares today are held in its dematerialised form, and hence when you buy or sell shares in the stock market, these are credited and debited through your Demat account. A trading account, on the other hand,facilitates buying and selling of stocks. It is a crucial link between your savings account and your Demat account. To receive your shares in your Demat account and the money in your bank account after you have sold shares, you must have a bank account linked to your Demat and trading account for a seamless transaction.
  • Unique Identification Number (UIN): If you are planning to make a single transaction of Rs. 1 lakh and above, you may need a UIN to trade in the stock market. Without a UIN, transactions over Rs. 1 lakh are not permitted.

Once your documents are in place and the formalities completed, you can begin trading in the Indian stock market to buy and sell shares. For instance, if you want to purchase 1000 shares of Company A at Rs. 500, but is currently trading at Rs. 550, you can instruct your stockbroker to buy 1000 shares when the price comes down to Rs. 500.

At the same time, if you are looking to sell 1000 shares of Company A at Rs. 800 in the future, that is currently trading at Rs. 600, you can instruct your broker to sell when the price reaches Rs. 800.

Stocks can be an exciting and fabulous asset class for a long-term investment. It offers numerous advantages and opportunities for investors over any other asset class. Let’s look why you need to consider the stock market as a vehicle and mechanism for building wealth.

  • Opportunity to be a part-owner of a flourishing business: When you purchase stock, you get to be part of an existing business having its employees, infrastructure and operations. Owning stock gives you the claim on the future profits of the business without the hassle of running the company.
  • Liquidity: Buying and selling stocks is effortless and can be done either through a phone call or a few clicks in your trading account.
  • Wide range of choice: The stock market offers an astounding number of opportunities to buy profitable business stocks at an affordable price. It is an effective platform that enables you to purchase or sell based on your call.
  • Affordable: To set up a new business or a venture requires a significant amount of finances. Moreover, the success of the enterprise may not be guaranteed. Compare this scenario to buying stocks in the stock market. You get the opportunity of owning a piece of the action with a few thousand rupees, unlike lakhs or crores needed to start a company.
  • Prospects of profitability: The expectation of higher returns on your stock investment can be greater than merely investing in a fixed deposit. Listed companies on the stock market typically strive to be profitable to increase their value, thus passing on the benefits to you as a shareholder. Over a while, the company could accomplish its goals with reasonable certainty further enhancing your returns.

Bottom line

Consider your time horizon and assess whether you are looking to become a trader or investor before beginning your share market journey. The best way to make money in any market and across economic cycles is to maintain discipline and exercise sound decisions based on rationale.

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