What is Stock Market and How to start Investing in it?
When you start working on your first job or earn a hike in your salary, the surplus income needs to be utilised in a beneficial way.
You can use the income to fulfil additional family obligations or grow your savings. However, if you think of investing in the stock market, here are some important questions you need to ask.
- What should I invest in?
- Are the funds sufficient for stock investments?
- Is my risk profile suitable for stock investments?
- What returns can I expect?
If you are a new investor and are yet to start to invest in the stock market, you may not have all the answers. However, with time, experience, and the help of a reliable stockbroker, not only will you be able to understand how to start investing in the stock market but also learn to gauge your risk profile and diversify your investment portfolio.
Quick Guide to Investing in the Stock Market
- Find a suitable stockbroker
Consider a reputed stock broker as your main support system initially. Your broker will not only provide you with the demat account and trading account but can also guide you with the help of financial advice, real-time stock updates, market research, and trading tools.
Ensure that the stockbroker is registered with the SEBI (Securities and Exchange Board of India) so that you are in good hands. You will also need to find out the brokerage charges for opening the account and the financial services you avail of.
- Provide the necessary documents
For investing in the stock market, your demat and trading accounts will help you store your securities and execute your trades, respectively. And since the trading account will comprise financial transactions, your PAN card will be necessary.
Apart from that, you will also have to provide your Aadhar card for the e-KYC process and verification. This will enable smoother transactions in the long run. Some brokers may also need additional documents, such as proof of income. However, the PAN card and Aadhar card are always mandatory.
Also Read: Documents required for opening demat & Trading account
- Research companies
Stocks of publicly listed companies can be traded in the stock market. However, not every company’s stocks perform well. This could be due to the demand and supply of the stocks. The demand-supply factor, in turn, may be determined by the general common sentiment of all the participants and elements in the market.
But as an investor yourself, do your research and pick stocks of companies that are performing or belong to growing sectors and industries. While stock recommendations may help, they need to come from experienced investors.
- Balanced diversification
When investing in the stock market, your stock portfolio should be a mixed bag of stocks. Unfortunately, most new investors tend to fill their portfolios with several stocks from the same company. This can be dangerous since the market is quite volatile sometimes.
While you can certainly select stocks of your choice, be sure that they are from various companies and sectors. At the same time, do not overdo it. Over-diversification in your portfolio can also dilute any chance you have at earning profits from the stocks.
Also Read: Portfolio Investment
The stock market presents a lot of opportunities. However, as an investor, you should always be updated with the right knowledge and the mindset needed for investments and trading. There is no one right way to understand the stock market; you could simply start by reading blogs by experienced investors or follow online lectures, read different books written by market experts and also start making small investments.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
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Frequently Asked Questions
Futures contracts are financial derivative contracts whose value is based on the underlying asset. If the underlying asset of a futures contract is stock, then they are known as stock futures. To trade in futures, the buyer agrees to purchase a certain quantity of stocks on a specific date, and the seller agrees to provide it.
The amount of money to be invested in the stock market would depend on an investor’s risk profile and financial goals. To get an estimate, first, divide your income into essential expenses and savings. Be sure to make provisions for an emergency fund as well. Any surplus amount apart from this is good for the stock market. It should be the money you are not afraid of losing.
Brokers registered with the SEBI are certified to offer financial advice and guidance. The services provided by stockbrokers are crucial for understanding the market and making trades. However, services and suggestions coming from an unregistered broker can lead to heavy losses for which you may not be able to lodge any complaints or grievances.