Welcome to the world of Stock market investing. Historically it is proven that stocks market or also called Equity investing yeilds much much better return than any other investment vehicle (like property, bond, debt, fixed deposits etc.). We are glad that you have choosen Equity investing.
In order to start investing in stock markets you need to have a DEMAT account (also called as repository). There are two authorities in India that provide repository for these demat account.
These repositories are used by brokerage firm (firm who provides demat account) to hold and safegaurd the securities (mutual funds, company shares etc).
To open a demat account, you will need contact a brokerage firm like ICICI Direct, Axis Direct, Zerodha or other brokerage firm. More about this later in this article.
Lets start with the steps to follow to start investing in Indian stock market.
Before you start thinking about Stock market, try to learn some financial terms like Profit, Loss, Debts, Balance Sheet, ROCE (Return on Capital Employed), ROE (Return on Equity), Debt to Equity, EPS (Earning Per Share), PE (Price to Equity) etc. We will be providing all detaila about these terms in this website soon.
This will help you understand about the company and its health and will be foundation for your success in stock market investing.
The first step is to be ready with the Mandatory documents you will need to provide to the brokerage firm to open the demat account. They are
Once you have all the documents mentioned in 1st step, you can go ahead with the selection of the brokerage firm.
This is very important step as if you do not select right brokerage firm you may end up loosing a lot of money in every transaction you do with your demat account as brokerage charge. Now a days a lot of reliable low cost brokerages are there that charge almost nothing as brokerage charge. Once of them we use is Zerodha. Other good brokerages are also there like HDFC Securites, ICICI Direct, Axis Direct etc.
Please do not run after many other new brokerage firms as we have heard many news recently where customers money and securities were misused by them. So be very very careful while choosing your brokerage firm. Always trust on renowned brokerage or company, people you can trust on.
Once you have opened your demat account, you are provided with following
Download your demat account apps (in case of Zerodha its Kite website and application) and be familiar with different features available in those application. This is very important step as this will help you avoid last minutes mess.
You can also go through brokerage firms demo videos generally available at YouTube. This helps you to know how to buy and sell shares.
While you open your demat account, you are required to provide bank account details. You will require to transfer money to your demat account. Please remember that balance in your bank account and balance in your demat account are two different things.
Please ensure that you have at least few thousands rupees in your demat account always that will avoid your account going into negatives in case your brokerage firm charge their annual maintenance fees.
Once you have money in your demat account, you are good to go with investing. Select a company to invest in. Do your homework, following are some of the parameters you should look at for any company to invest in (There is no hard and fast rule, but below parameters are good enough for a novice investors to ensure that they do not loose a lot of money, if they do not gain)
Financial apps or websites help you analyse company, its financial position and other related news. There are many apps and once of the app we like is StockEdge. You can also try other apps availabe in mobile store. There are few websites too that provide good information on the company, be regular to those websites. This website also provides good information so be regular visitors here.
Do not borrow and Invest.
As stock market investing is for long term, 3-5 years+, never borrow and invest in the market as in short term you many end up loosing money that will give you a lot of mental pain.
Do not invest for short term.
Stocks market movement is unpredictable, no one can predict the exact event and its impact on the market. So try not to invest for the short term or do not invest with the money you need within a year or two.
Do not believe on multibagger SMS, stock market tips etc.
When market runs, a lot of SMS, Tips starts coming in on your mobile either by some companies or from your friends or relative. Try to avoid them as most of them are a trap to relailers like us. Always do your own basic research based on Step 5 parameters and/or contact your financial advisor before actually investing.
Do not invest in high and sell in low
This trait is very difficult to follow. Generally when market starts going up, a lot of people starts putting money in stock market and when it crashes, people sell in loss out of panic situation. Try to do opposit, invest in low and if you need money in near term then only book profit i high market.
No event is permanent, keep patience.
No event that cause stock market crash is permanent, try to read the history of the stock market for last many decades, you will notice that after every 10-15 years market crashes and again after few months of years it reach to new high. So do not panic when market crashes. Keep patience.
I hope this article has helped you know how to start investing in stock market in India. Please feel free to write comment or feedback. Thanks for reading.
Website disclaimer: The views, opinions, investment advices (if any) expressed by author on Sharefunda.com are their own and not that of the website or its management. Users are advised to contact certified financial advisor before making investment decisions.