how to invest in share market - stocksaim.com

Investing in the share market can be tricky especially if one is a beginner. However, the process is very streamlined now that all the tools to invest in a share market are available electronically. Curious about how to invest in share market? Here is the investment process.

How To Invest Money In Share Market

Always wondered how to invest in shares as a beginner? The following guide will detail this process for you. Keep in mind that there are two types of share markets you can invest in. These are primary and secondary share markets as detailed below.

1. Investing in the Primary Share Market

It is typical for corporations to offer up their shares on a primary share market through a process known as an initial public offering. This means that when one chooses to invest in the primary share market, they can do so through an initial public offering or IPO. To invest in both primary and secondary markets, it is necessary for a trader to have their own Demat account which will hold electronic copies of their shares. Additionally, a trading account is also important which will help in buying and selling shares online.

In a few rare cases, it is also possible for a trader to apply directly from their bank account. Based upon the market’s response to the initial public offering, a trader will be allotted a select number of shares. Once all the IPO applications are received and counted by the company, those shares are allotted based on demand and availability. It’s quite easy to apply for an IPO through your net banking account via a process that is known as Application Supported by Blocked Amount (ASBA).

As per the ASBA process, if one applies for shares that are worth ₹1 lakh, instead of being sent to the company, these funds will be blocked into their bank account instead. Once you receive your allotment of shares, the exact amount will then be debited with the balance being released. All applications that are sent to IPOs are required to follow this protocol. Once shares are allotted to traders, they are listed on the stock exchange, and you can begin trading them within about one week’s time.

2. Investing in the Secondary Share Market

How-to-Invest-in-Share market - stocksaim.com

The secondary market is usually what traders are talking about when they refer to stock market investments. Curious about how to invest in stock markets as a beginner? Here are a few key steps toward doing so:

Step 1: Similar to a primary market, a secondary market also requires that you have your own Demat and trading account. This is the starting point to invest in the secondary market. Both of these accounts should be linked to a pre-existing bank account for a seamless transaction.

Step 2: The next step is to log into that trading account. Then go ahead and choose the shares that you wish to sell or buy. Ensure that you have the requisite amount of funds in your account that can help you buy the shares. Alternatively, if you wish to sell, make sure you have the right number of shares before you choose to sell.

Step 3: Next, decide the price at which you want to buy a share versus sell it. Wait for the buyer or seller to reciprocate to that request.

Step 4: Complete your stock market investment transaction by transferring the money/shares and you will receive money/shares.

As detailed above, the steps for how to invest in stock markets are very straightforward and simple. Ensure that you are mindful of the time which you wish to remain invested for and the financial goals you want to achieve from your investment.

Documents required for opening a Demat/Trading Account

When it comes to how to invest in the share market, one key aspect is the documents necessary to open your demat account and trading account. They are as follows:

  • Applicant’s PAN Card
  • Applicant’s Aadhaar Card
  • Applicant’s name on a canceled cheque from their active bank account showing ISFC Code, account number, Account holder’s name, and signature.
  • Documents detailing that the applicant earns a steady income.
  • A proof of your address that is based on a list of documents that have been accepted by your broker, depository participant, or bank
  • Passport-sized photographs of the applicant.
how to invest in share market- how to open demat account

Things to keep in mind before investing

Step 1: Identify your Investment Requirement

Before you start with your stock market investment, you should know what your investment goals are. You must also figure out what amount you are willing to invest, and at what pace. You need not invest a large lump sum. In fact, you should avoid doing that at the beginning of your investment journey in the stock market. You should instead plan to invest small amounts on a regular basis. Even if you have a large corpus, it is better to invest it over a longer period so that you don’t have to worry about timing the market.

Remember that you should only invest in shares what you are comfortable losing. List all your income, deduct your expenses and debt obligations from it – what remains is your investment surplus. Some of it should go towards your retirement plan, insurance and some towards an emergency fund. The rest is available to invest in stocks and other investment instruments. Don’t forget to factor in tax liabilities when planning your investments.

Step 2: Choose your Investment Strategy

Entering and exiting the market at the right time is key to making an optimal profit in the share market. Track the stocks that you have identified in previous steps in share market live. Remember the old adage: buy low and sell high. You must try to enter the market when the shares of the companies you want to invest in are trading at a discount, and exit when they command a premium. This also means that you should avoid herd mentality and look to buy when the market is dumping a stock and vice versa.

Step 3: Execute the Trade

Almost all stock market trades happen online today. You should execute your trade online as well. Make sure you are familiar with the trading tool your broker has provided and submitted the trade request with the right price and quantity. Your broker would also provide a free tutorial on how to invest in share market online. If you are looking to trade intraday, do not forget to add stop-loss and target price. It is best to decide these levels before you buy shares as your emotions may cloud your judgments when monitoring the share market live.

Step 4: Monitor your Portfolio

While your investment strategy will also provide you with a target portfolio, it is important to periodic review your portfolio to ensure your initial decisions are still correct. The stock market is a dynamic place, and the realities change quite frequently. It is important to track your portfolio to minimize potential losses and maximize profits. This does not mean that you need to react to every change in price level, but that you must be informed of larger trends in the market.

With these simple steps, you will be able to start your investment journey with confidence. The key to success is maintaining discipline in executing your investment strategy, and a desire to learn something new each day.

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