How To Invest In The Share Market In 2022 – A Beginner’s Guide

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.

What is a Share Market?

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.

How to Start Investing in the Share Market?

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:

• Make an estimated budget of how much you can invest in the share market without it upsetting your personal finances and basic needs. 
• Open a Demat/Trading Account. A Demat account is like an electronic locker for the shares you hold. When you buy a share, it is credited to your Demat account. You can open a Demat account with any broker electronically by completing basic KYC which involves identification documents like Aadhaar card, PAN card, etc.
• Once you have opened a Demat account with a broker, you can start investing in any stock you like.
• Ensure that you have a stock investment strategy primarily based on your investment horizon, goals, and risk profile. 
• You may get tips from certified financial professionals or share market advisors. 
• Learn about various stocks, technical indicators, and how to identify fundamentally strong stocks.
• Manage your investment portfolio and rebalance it regularly. 

Also Read: How To Select 10 Best Mutual Funds To Invest In India [2022]

How to Trade in the Share Market?

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.

Documents Required For Opening a Demat/Trading Account

As a part of the stock investment process, it is mandatory to open a Demat account, for which the following documents are required:

1. Aadhar Card
2. PAN Card
3. A cancelled cheque (for IFSC Code, account number, Account holder’s name)
4. Address Proof
5. Applicant’s passport-sized photograph. 

The Demat account is opened with a broker upon submission and successful verification of documents.

How to Learn Share Market Trading?

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:

1. Educate yourself by reading regular newspaper updates regarding financial and economic news, including reports about the companies you have/want to invest in. Learn about the pricing of the shares and the movement of the market and shares on a daily basis.
2. When you study the markets and habitually track them, you can develop an accurate understanding of what investment tactics to employ.

Types of Investment 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:

Primary Market Investment

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).

Secondary Market Investment

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.

Investment Horizons – Short Term & Long Term

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.

Things to Keep in Mind Before Investing

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. 

Who are Stock Brokers?

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:

1. Provides explicit investment advice
2. Manages client portfolio
3. Studies financial reports and gets up-to-date information regarding financial markets.
4. Suggests the clients as per their investment objectives and market conditions. The portfolio of each client is communicated to them periodically. 

Also Read: Section 115 QA – Income Tax On Buyback Of Shares

Final Word

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.]

FAQs on How to Invest in Share Market

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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.