How to Invest in Stocks in 5 steps?
Most people want to invest their surplus income for wealth creation. And the stock market is an ideal place to do that. So, if you learn how to invest in stocks, it can help supplement your income. Moreover, in certain cases, disciplined trading can even replace your income.
Stock market trading gives people the freedom to invest anytime, anywhere. You can choose to invest in the stock market to finance business expansion, grow your retirement fund, save for a vacation overseas, or achieve other financial goals.
Nevertheless, many potential investors are not convinced to start investing in stocks. This is because they are unsure of where to start. This beginner’s guide to the stock market provides all the information you require to set out and start investing.
Investing in Stocks for Beginners
The evolution of technology has led to the advent of many electronic trading platforms. These platforms make it easier for anyone to start trading. Here are five simple steps on how to invest in stocks:
1.Find a broker
First, you need to register with a brokerage firm or a Depository Participant (DP). The brokerage firm gives you access to the relevant stock exchanges, such as the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), etc. It is vital to register with the right DP to buy, store, and sell stocks through them. The stockbroker will provide the interface to interact with the stock market.
It is suggested that you open an electronic account with the DP since it allows you to view all your positions in a single glance. Some brokerage firms also offer real-time market data. This information is crucial to making an investment decision. It can help you differentiate between a loss-making trade and a profitable one. Thus, do your research before finalizing on a DP or broker.
2.Open your trading and Demat account.
To start trading, you require a trading and Demat account. The trading account lets you execute the trades, while the Demat account stores your positions electronically. First, you need to fill out the broker’s online account opening application form. To open the accounts, you need to submit documents like identity proof, permanent address proof, income proof, etc.
3.Explore your trading and Demat account
Once the broker approves your application, it will send you login credentials for your trading account. Use the username and password to log in and explore your trading platform. Next, add money from your bank account to your trading account.
There are two separate strategies that you can choose from:
Traders aim to earn profits based on short-term price fluctuations. It is mostly a practice followed by intraday traders who square off their positions on the same day. They focus on taking large positions and sell them when there is a small price fluctuation.
In this strategy, people hold their positions for a long time. The objective is to identify undervalued companies, buy their stock, and hold the position unaffected by the minor fluctuations of the market.
4.View stock details
As you learn how to invest in stocks, it is crucial to know how to identify the right stocks. Read about the company’s background in detail. Keep in mind essential factors, such as the company’s business model, management, competitors, etc.
5.Diversify your portfolio
If you refer to any beginner’s guide to the Indian stock market, you will see that it recommends you maintain a diverse portfolio. It means that you should invest in stocks from different sectors. This way, your portfolio is not vulnerable to movements in one sector. Investment in large-cap companies is also good as it helps to earn small but stable returns.
Now that you know how to invest in stocks, open your trading and Demat account without further ado. Online trading platforms don’t take long to complete the account opening process. The convenience they offer has led to a steep rise in the number of retail investors and traders.
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
Stock prices are influenced by changes in demand and supply factors. A trader’s preference of one stock over the other is dependent on factors like company earning, company perception, earning per share, a valuation multiple, etc. By understanding stock price movements, you can get better clarity on how to trade in the share market in India.
No. On Saturdays and Sundays, the stock exchanges remain closed on Saturdays and Sundays except when a special trading session is announced. The operation hours for NSE and BSE are from 9:15 am to 3:30 pm, Monday to Friday.
In the past, you could buy or sell orders by calling your stockbroker. But with the emergence of electronic trading platforms, investors can now place orders directly via the Internet.
It is your personal choice. If you want to buy stocks without a broker, you will have to invest through the company’s direct stock purchase plan.
Yes. You can start your investing journey with ₹500. To place your buy/sell order, all you need is a trading and Demat account.