How to Invest In Share Market – Beginner’s Guide
When you think of investments, stock market is the first thing that comes to your mind. The reason is it helps you to enhance economical and financial position exponentially. The profit rates in the stock market are way too high of initial investments. It is also exciting to review your investment returns and to see how they are building up at a faster rate than your salary.
Here we have provided you the simple guidelines that will help you to understand stock market and how you can start investing your money.
The very first thing you need to do is get a Demat Account and a Trading Account.
What is Demat Account and Why it necessary?
If you wish to buy/sell shares in the share market, then you have to first place the order with a broker, or you can do yourself using online trading systems. When you buy a share, the message is transferred to the stock exchange [either NSE or BSE ]. The order then stays in the queue of exchange’s and gets executed only if the price of that share comes to that value which you have decided. Once you get the confirmation of this transaction, the purchased shares will be sent to your demat account. The shares will be stored in a demat account in the digital format.
The Securities and Exchange Board of India (SEBI), has made it compulsory to open a demat account if you wish to invest your money in the stock market.
Demat (short form of Dematerialization) is the process by which an investor can get shares (also called as physical certificates) converted into an electronic form maintained in an account with the Depository Participant (DP).
DP could be any organizations that are involved in the business of providing financial services. This can be banks, brokers, financial institutions, etc. DP’s are like agents of Depository.
Depository is an organization whose job is to maintain investor’s securities (securities can be shares or any other form of investments) in the electronic form. In India, there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.)
People who wish to open Demat account have to go to DP and open the account.
Opening a Demat account is very simple and is similar to opening the saving bank account with any bank.
As you need a bank account to save money, deposit cheques, etc., you will need to have a demat account so that you can buy and sell stocks in share market and hold it in that account.
How to Open a Demat Account
Following is the steps that you need to take for demat account opening.
First visit Depository Participant (DP) that is registered with SEBI. These days almost all the stock brokers and banks offer depository services.
Next you need to fill out the demat account opening form (DAO form) given by your chosen DP.
You will need to attach copies of documents that are asked by SEBI along with the form.
You will also be asked to show your original PAN card during the opening of demat account.
Once your account is opened, a single demat account number will be provided to you that needs to be specified for every transaction.
Documents Required For Opening a Demat Account
The following documents are to be submitted with your application for opening your demat account –
- PAN Card
- Two photographs (passport-sized)
- Any of the following as Identity Proof
- Driving license
- Photo ration card
- Voter’s ID
Any of the following as Address/Residence Proof
- Driving license
- Voter’s ID
- Utility Bill (Telephone, Electricity etc)
- Photo credit card
- Bank Statement
- Photo ration card
The Stock Indices are touching new highs on the back of surging volumes. More and more investors are investing /trading in the stock markets than ever before. It is therefore imperative for the investors to follow the Dos and Don’ts in general while dealing in the stock market. As there are attendant risks associated with it.
Given below are the Dos and Don’ts in general for investors who are dealing in Stock markets.
1. Always deal with the market intermediaries registered with SEBI / Exchanges.
2. Give clear and unambiguous instructions to your broker / agent / depository participant.
3. Always insist on contract notes from your Broker. In case of doubt of the transactions, verify the genuineness of the same on the Exchange website.
4. Always settle the dues through the normal banking channels with the market intermediaries.
5. Before placing an order with the market intermediaries please check about the credentials of the companies, its management. its fundamentals and recent announcements made by them and various other disclosures made under various Regulations. The sources of information are the websites of Exchanges and companies, databases of data vendor, business magazines etc.
6. Adopt trading / investment strategies commensurate with your Risk bearing capacity as all investments carry risk, the degree of which varies according to the investment strategy adopted.
7. Please carry out due-diligence before registering as client with any Intermediary. Further, the investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document. which forms part of investor registration requirement for dealing through brokers in Stock Market.
8. Be cautious about stocks, which show a sudden spurt in price or trading activity, especially low price stocks.
9. Please be informed that there are no guaranteed returns on investment in stock markets
1. Don’t deal with unregistered brokers / sub-brokers, intermediaries.
2. Don’t deal based on rumors generally called ‘rips’.
3. Don’t fall prey to promises of guaranteed returns.
4. Don’t get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying.
5. Don’t leave the custody of your Demat Transaction slip book in the hands of any Intermediary.
6. Don’t get carried away with onslaught of advertisements about the financial performance of Companies in print and electronic media.
7. Don’t blindly follow media reports on corporate developments, as they could be misleading.
8. Don’t blindly imitate investment decisions of others who may have profited from their investment decisions.
BSE has installed a Toll Free line 1800 22 6663 at which the investors can inform on any specific lead with regard to any type of undesirable trading practices in any scrip or any type of market aberration observed by them. Investors are requested to get their messages recorded in English or Hindi. Identity of the investor will be kept confidential.