As someone who had never before invested in the stock market, I had some of these fears- I heard the stock market is always volatile, what if I lose all the money I invest in it? Am I prepared to take the big leap and consider the stock market investment as a safe investment option that gives fixed returns? For some time, these fears kept me away from investing in the stock market. But, then I saw my friends buy a new car and fulfil their financial goals one by one, just by investing in something I feared the most.
I wanted to get over my fears and thought to consult an investment expert who guided me well, and due to which, I earned handsome returns as well. Today, I will tell you the tricks on how to invest in the stock market and the ways you can be rewarded in a long term, especially if you are new to it.
Read More: Types of Investments in India
- Stock Market is a Clean Investment Option
Stock market investing is not gambling. It is about investing in your economy, which is the Indian economy. Owing stock is similar to owning an organization. If you purchase a company’s stock, you are funding the company’s activities. Thus, if Indian companies grow and flourish, the economy will also prosper.
- What is the Secret of Earning Returns?
In case the company does well, the shareholders receive income in form of dividends. If the company does very well, the share price goes up because it becomes a lucrative investment option. This is known as Capital Gains. If you hold a share for a year or more, you can sell the share for a decent or handsome profit. You do not have to pay any tax on these gains.
Now Let Me Tell You About the Steps of Investing in the Stock Market:
- Consult an Expert for Advice
If you have never invested in the stock market before, do not start investing on your own. It is best to seek the advice of an expert and approach a financial planner who can tell you about investment options based on your risk appetite and financial position. You can speak with your family members and friends who invest. Also, increase your knowledge about the stock market by reading relevant journals, books, newspapers etc.
You may consider the advice of the stockbroker, but do not follow everything he/she says. Do take a second opinion as the broker may have vested interests. Now, when you begin investing, it is best to invest in known names and giant companies that have a good business reputation as there would be a lower risk of losing money and higher chances of reaping the most returns.
- Find a Reliable Broker
You may not have much knowledge about facilitating investment in shares. This is where a stockbroker can help. You can choose an online broker or an offline broker. The online broker will work for you and offer a discount on his/her services. Their charges would be lower than the offline brokers. However, these may not offer you the best of services.
Offline brokers normally have established practices and a wide network of offices, which give them an edge over online brokers in terms of expertise. Do not choose a broker blindly. You have to read about a broker’s services and get as many details on them as possible. If you know a friend or someone who is taking the help of a trusted broker, you can consult the same person.
- Open a DEMAT Account
Every listed share in India is in a dematerialized format, which means it is held electronically. To invest in shares, you have to open a DEMAT account.
- The broker will provide you with an account opening form, wherein you need to fill in the asked details and submit it along with copies of documents, such as driving license, PAN card etc.
- You have to complete your KYC (Know Your Customer) process. Find out if you can get e-KYC done.
- The documents you provide shall be verified against the original documents.
- When your application is processed, you will receive your DEMAT account number or customer ID, which you can use to access your account online.
- You may have to pay an annual maintenance charge on your DEMAT account. The charges will differ from one broker to another.
- The trading account given by the broker to you will be linked to your DEMAT account, from where you can perform all transactions.
- There would be charges associated with transactions. The broker can charge a flat rate on transactions or the charge will be decided on a per transaction basis.
- Select Mutual Funds
Mutual funds are investments in stock on your behalf. It is the best way to start your journey of entering the stock market. You can begin with diversified funds. These funds invest across various firms so that the risks are lowered. You may even choose ELSS (equity-linked savings scheme), which will also assist you to save on taxes.
By now you may have gathered that investing in the stock market is now a scary deal. It is easy to reap benefits from stock market investing if you follow the above-mentioned steps properly. However, without complete knowledge about the same, you may feel doubtful about the stock market. Thus, take up mutual funds and once you are comfortable, you can think about venturing into stocks.