How to Invest in Share Market: Generally, equity shares and commodities like gold and silver are the most famous and common options of investing in India. If you want to do investment, then the first question that comes to your mind
“How to Invest in Share Market ?”
Here is proper information to learn how to invest in the share market for beginners.
Just stand in a crowd and utter the phrases “aaj market kaisa hai?” (how is the market at this time?), and there will likely be opinions pouring in from all instructions. The perfect half is that even individuals who have by no means ever invested in shares may have sturdy opinions and even ideas at instances for the way to put money into share markets. So if you’re somebody who merely doesn’t need to stand and provide ideas without doing something and needs to really put money into share markets in India, then you are at the right place to know all about investment in the share market.
Before understanding how to invest in the stock market first you should know what is exchange?, What is Nifty and Sensex?, what is BSE and NSE. You will know all here.
Table of Contents
Requirement before you start investment in stock market
Before start investing in the share market, you need a few requirements, I will mention them first. Here are a few things you will require to start investment.
- Bank account
- Demat & Trading account
- Internet connection (As usual)
- Some documents like identity/address/income proof
First, you need to open your Demat and trading account (all in one). You need the following document to open an account
- PAN Card
- Aadhar Card
- Bank statement/Canceled cheque/ Passbook
- Passport size photo
Now the big question is where to open Demat and trading account, we will discuss it in the upcoming paragraph
Some advice before you start investing
When people come to the stock market they come with a lot of dreams and desires. They want to make lakh of rupees in few days, which is not true.
You may hear 100’s of people make huge wealth from the market while 1000’s people do not.
90% of people lose money in the stock market while 10% of people make huge money from the market. To become part of 10% here are some cautionary points.
First clear your “High-interest” debts
It is very important to clear your all high-interest debts before start investing. If you have taken any personal loans, credit card dues, etc then first clear them all because their interest may higher than your profit return. If you make an investment in the market and you get a good return but you are paying all profit to fill your debts then that does not make any sense. So clear your debts before entering the stock market.
Invest only when you have extra surplus fund
If your parent give you money for tuition fees, or you have to do your daughter’s marriage next month or any other reasons. If you invest this emergency money in the stock market or any other asset then it is not good. May your investment can give you negative results for short period.
So always remember never to invest your emergency fund in the stock market. Always invest money when you have a surplus amount of money.
Keep extra cash in your hand
Always remember never to invest your all money at the same time. Keep some cash in your hand for some emergency purpose. When you keep some cash in your hand you feel financial freedom.
How to Invest in Share Market?
Step 1: Fix your investment goal
It is very important to start any work with defined goal. it is also applicable in term of investment. Know what you want.
Do you want to increase your saving by beating inflation? Do you want a passive income from dividends? Or you just want to invest for fun along with creating wealth?
Step 2: Start reading investing books.
There are more than 100 decent books available to learn investing. I suggest some books become a master in investing for beginners.
- The Intelligent Investor Book by Benjamin Graham
- Common stocks and uncommon profit Book by Philip Fisher
- One up on wall street Book by Peter Lynch
- The Little Book That Still Beats the Market Book by Joel Greenblatt
- The Dhandho Investor Book by Mohnish Pabrai
Step 3: Choose Stock broker
There are so many stockbrokers available in India you have to choose very wisely. Mainly there are two types of stockbroker.
- Discount broker
- Full-service broker
Full-service brokers are the broker who provides you some advice and research for investment and trading. They charge more brokerage and charge per trade than Discount brokers.
Some examples of Full-service broker are ICICIDirect, HDFC Sec, Sharekhan, Motilal Oswal, etc
This broker does not provide any advice to their clients, they are a “do your self” type broker. Discount brokers provide low brokerage and low charges compare to full-service brokers. They have high-speed and decent trading platforms.
Examples : Zerodha, Upstox, 5-PAISA, Groww, etc
I highly recommend going through a discount broker (like Zerodha). It will provide you low brokerage and a high-speed platform.
How to Open an Account in Zerodha?
Documents required to open a Demat account at Zerodha.
Following are the documents required to open a Demat and trading account at Zerodha. I’ll suggest you to maintaining soft-copies of all these documents.
- PAN CARD
- Aadhar Card
- Canceled cheque/ Bank statement
- Your Signature on a chunk of paper
- Passport size pic
*Non-compulsory– Earnings proof: It’s necessary to submit earnings proof if you want to work in Futures and options – Equity, Commodity, and Currency pairs. You may submit Form-16, IT acknowledgment copy, 6-month Bank statement, or your newest salary slip as proof. Anyways, ignore this doc in case you are planning to invest only in equity, not in derivatives, commodity, or currency.
Account opening charges
- Demat and Trading Account: Rs 200
- Commodity Account: Rs 100
(Notice: That is the Revised account opening expenses up to date in FEB2021 by Zerodha)
If you wish to trade in both, then you might want to pay an account opening cost of Rs 200+Rs 100 = Rs 300.
Now, there are two methods to open a Demat and trading account at Zerodha:
With the help of the following online method, you can open your account with Zerodha only in15 minutes if in case you have all the required documents.
Open your Demat account at Zerodha
Step 4: Start researching common stock and invest.
This is a very important step in investing. If you can find good stocks then your 50% of work done.
Step 5: Have a good exit plan
This is always good to have exit plan. There are two ways to exit from market either by profit booking or cutting loss.
There are some scenarios when you sell your stocks. When you complete your investment goals when you badly need funds when you find better stock to invest when the company contently making a loss.
Always keep a good exit plan before start investing.