How to Invest in the Stock Market: A Guide for Beginners

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Investing in the stock market is an opportunity to grow your money. It can be a source of indirect income for you. However, investment in the market can be tricky since it requires lots of logic, prediction, and analysis. But you do not need to worry. As In this article, we have covered everything you need to know to start investing in the stock market.

How to invest in Stock Market

You can invest in the stock market/share market conveniently. Here, we’ve decoded the process in 6 steps:

Step 1: Choose an Online Trading Platform

Several trading apps are available in the market through which you can buy and sell equity, popularly known as stocks. Through these apps you can study about market trends, understand which stock benefits you, check risk factors and get other essential information. You can select an authorised app with low brokerage charges, zero hidden fees and high transparency.

Step 2: Open Your Demat Account

To open your demat account, you’ll need to log in on the app using your mobile number and OTP. Once you sign up, you can open your account using your basic, bank, and PAN card details. Afterwards, you’ll need to upload the required documents, such as a photo, proof of address, income, etc. Now verify your account with video KYC.

Step 3: Connect Your Demat Account with Your Bank Account

You’ll need to connect your demat account with your existing bank account to smoothen your investment process. You’ll need to provide the account number, IFSC code, account type, etc. The bank details with demat are used to credit any payable amount credited to you, like dividends, interest, etc.

Step 4: Identify a certain amount to invest in the beginning

Since you’re a beginner, initially identify how much money you can invest without worrying about loss and profit. Add this money to your fund to start buying stocks.

Step 5: Analyse Different Stocks

Check out different stocks and consider their authority by learning about the company, its history, and current ups and downs in the business. You can also check the stocks’ analytics on the app using candle charts, pie charts, etc. Moreover, you can identify the stock to invest in by doing market research, its trends within past years, and sectors in which the business is operating, like IT, finance, textile, chemicals, private banks, refineries, etc.

Step 6: Purchase the Stocks

Once you identify which stock is right for you and can benefit, purchase the stocks at their listed price and specify the Unit. The purchased stock will reflect in your account within 2 to 3 business days after the transfer. However, sometimes, it can be delayed because of frequent BTST activity, insufficient liquidity in the acquired shares, or outstanding depository participant dues.

Documents Required to Invest in Stock Market

To create your Demat account, individuals require certain documents. These include

• Bank Account & Cancelled Cheque
• Proof of Address
• Proof of Identity
• Pan Card
• Photograph
• E-sign
• IT return or payslip (optional)

Using these documents, you can create a Demat account and start investment. You must know that investment is a process you’ll learn by investing a certain amount of time, learning from your experience, and keep practising. Moreover, you can also consider certain factors that help you and your investment.

Key Factors to Look at Before Investing in the Stock Market

1. Investment Objectives

You can consider stocks to buy by identifying your investment objectives, such as if it’s long- or short-term. What’s your goal? Are you buying stocks intending to purchase a home, car, jewellery, etc., or are you investing for future plans like retirement? You can invest in such stocks that align with your objectives.

2. Risk factor

You should learn how much risk you can bear by identifying your financial goals and status. If you have a low-risk appetite, invest in stocks less affected by the change in the market.

3. Diversification

Diversification is crucial when you’re on a path to learn the stock market. The diversification refers to the investment in the stocks of different companies, sectors etc, to mitigate the financial risk.

Considering these factors while investing will help you select the stocks and invest with a calculated risk.

Charges associated with Investment in the Stock Market

To begin investing with the stocks and keep the process on, you’ll need to pay certain charges; these are:

1. Brokerage Charge

The brokerage charge is a fee for the platform you use to purchase and sell stocks. Generally, the brokerage charge is 0.03% of the transaction value. However, some stock market platforms apply flat charges for equity delivery.

2. Account opening charges

The account opening charge is a one-time fee. Many online platforms offer this service at RS. 0.

3. Annual Maintenance fee

It’s a fee associated with the annual maintenance of your demat account.

4. GST

Goods and services tax also applies to the amount of selling and buying of the stocks. The GST charges apply to the stock amount, brokerage, SEBI, and transaction charges.

5. Security Transaction Tax

Security Transaction Tax (STT) is a charge that applies on both sides of the buy and sale transaction. However, the STT for intraday stock trading implements only when the stock is sold. The STT over intraday trade is 0.025% and for the general stock buying and selling process, the STT charge is 0.1% for each side.

6. Transaction Charges

There are two types of stock providers: NSE- National Stock Exchange and BSE – Bombay Stock Exchange. The transaction charges for the stock from NSE are 0.00325%, and for BSE, they are 0.00375%.

7. Stamp charge

The stamp charge is related to the buy side. It’s 0.015% of total turnover or ₹1500 / crore whichever is low while investing in stocks.

8. SEBI Charge

Securities and Exchange Board of India, SEBI, which regulates the stock trading market, charges a minimal amount on selling and buying transactions. The charges are ₹10 / crore.

Tips to Invest in Stock Market

1. Invest in the Right Stocks

When it comes to investment, you need to pick the right stocks and buying the right stocks is about something other than selecting your favourite company, like you do while purchasing the products. Such stocks should have performed well in the past and have the prediction to serve better in the future.

2. Plan for Long-term investment

Expecting growth in stock in a few days or hours holds high risk. Hence, for beginners, investing in stocks with long-term plans is beneficial.

3. Invest in Multiple Sector/Companies

Never invest all your money in the same place. Diversify your investment by buying equity/stocks of different companies and sectors.

4. Be prepared for risk

Investment in the stock market or share market is associated with market risk, meaning that with the fluctuation in the market, the stock prices can either go up or down. So, as you expect profit from the investment, stay prepared for the risk.

5. Start Now

The earlier the better. Don’t wait to earn a massive amount of money and start investing —invest with a small amount. The earlier you start, the more you’ll learn and understand the market. Your experience with stock trading makes you ready to make a significant investment.

Conclusion

Investment in stocks can be time-consuming and risky, but it holds the benefits of learning finance and the market. It lets you grow your money. You can invest in the stock market with the online trading platform with just a few clicks. However, before beginning with the stock market, consider the calculated risk, understand the stock market and its fluctuation.