The global markets witnessed a sharp dip at the onset of pandemic-induced lockdowns in March 2020. While many stocks tumbled to their all-time lows because of global economic activity plunging, it proved an excellent opportunity for investors looking to enter the stock markets. If you want to know how to invest in the share market, here’s a practical guide for beginners. Keep reading to get useful information.
A share market is where shares of companies are traded. It provides a platform for buyers and sellers to trade publicly listed shares. Many investors enter the share market to make profits by buying shares/stocks of companies and selling them when their prices appreciate. The share market operates during specific hours (9:30 AM to 3:30 PM) on weekdays (except public holidays) during which transactions occur.
To start investing in the share market, you must have some knowledge about various aspects of the share market. Individuals who are already trading in the share market must also keep themselves updated about the ways of the stock market to make wise investing decisions.
Here is a guide on how to start investing in the stock market for beginners:
You need to open a Demat account to buy or sell shares online. It holds the shares you purchase in an electronic form. To have a seamless experience, the Demat/Trading accounts are linked to a pre-existing bank account, using which you can transfer funds to your brokerage account and buy stocks. Similarly, you can transfer the funds received from the sale of stocks from your brokerage account to the linked bank account.
If you are a beginner, you may also like to open a 2-in-1 account. This account allows you to trade in equities, currencies, derivatives, etc., easily. There are a few banks like Axis Bank, HDFC Bank, Kotak Mahindra Bank, ICICI Bank, IndusInd Bank, and SBI where you can open this 2-in-1 trading account and link it with the bank account.
Note: The shares are credited into your Demat account in T+2 days, i.e. two days after the trade was carried out.
As a part of the stock investment process, it is mandatory to open a Demat account, for which the following documents are required:
The Demat account is opened with a broker upon submission and successful verification of documents.
Share market trading is a straightforward process that you can execute on your mobile phone. Here is a 2-step guide on how to learn to trade in the share market:
There are mainly two types of investments in the share market. Understanding these two market investments will further guide you on how to invest in the share market:
A primary market is where securities are created to be traded. This is where companies sell new shares to investors. This process is alternatively called getting listed on a stock exchange. The term for a company selling its shares to the public for the first time is called an IPO (Initial Public Offering).
Also known as the stock market, the secondary market is where an investor can buy and sell securities. Once securities are sold in the primary market, they can be traded in the secondary market. Trades take place in the secondary market, where an investor can buy shares from another investor by paying them the price agreed upon by the two parties.
The investment horizon is the period an investor aims to hold on to security. The investment horizon could range from a day to several years. It is essential to educate yourself about investment horizons if you want to understand how to invest in the share market.
The investment horizon depends mainly on your financial goals, which could be short-term (buying a car, saving for a holiday, getting your home renovated), or long-term (buying a house, children’s education, retirement).
Long-term investments are meant for a target that needs to be achieved in a few years, usually over 5 years. On the other hand, short-term investments are made to achieve goals planned over 1-3 years via stocks and mutual funds.
Navi could be the right choice if you want to invest in Mutual Funds. Navi offers a low-expense rate while being a highly reliable platform for your investments.
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Here are a few things you need to keep in mind before you begin investing in the stock market:
Assess Investor Profile and create investment plan: Each investor has their own financial goals that should be met at the right time. The risk and expected returns can be adjusted to meet the financial objectives after a particular tenure. The risk and expected returns can be adjusted to meet the financial objectives after a particular tenure. Hence, invest accordingly.
Diversification is a must: Not all investments should go into volatile asset classes, nor do they concentrate on fixed-income generating products. For example, volatile equities are combated with investments in bonds. There must always be a balance between the two to maintain a good ratio of risk and returns.
An individual investor cannot buy or sell shares on a stock exchange directly. They have to do it through the registered members of stock brokers. They are employed at a brokerage firm or acting as independent services providers. These individuals are known as stock brokers.
Here is what a stock broker does:
Understanding how to invest in the share market is easy. The share market and trading tactics can be learned step by step once you begin investing. Moreover, in today’s world, much material is available to research before adopting any investment strategy suitable for you.
If you want to start investing in Mutual Funds, visit Navi Mutual Fund. You can now have an up-to-date market analysis, a low-expense ratio and expert guidance which make your investment decisions lucrative & easier. All the necessary parameters are considered, and market research is done to take care of your interests. You can stay worry-free and get the optimum benefits out of your investments.
[Disclaimer: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully before investing.]
Ans: Before making buying decisions, you should consider a few factors like how much capital is needed, diversification among different asset classes, and the number and type of shares you need to attain your financial objectives.
Ans: There is no difference between shares and stocks. It depends upon where it is used. Different countries use different terminologies. In India, it is called Shares, whereas, in the USA, it is known as Stocks.
Ans: It all depends upon how much return you expect from your investments, how much risk you want to take, and the time in which you want to achieve the targets. Choose from the best suitable options available in the market.
Ans: Many apps guide you on stock-related information. You can get information from several websites, companies’ annual reports, newspapers, channels, etc. However, you must stay vigilant and act on such tips wisely.
Ans: Brokers help you to carry out buying and selling transactions even when the markets are closed. Though the actual trade stays in the queue and gets executed once the market becomes functional.
Before you go…
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.