Trading in the Stock Market can be daunting, especially for newcomers. The process takes time to understand and there are a few important procedures you need to follow as well. But the sooner you get started the better because the Stock Market can become an incredible source of fortune for you in the long term.
In order to get you started quickly, we’ll briefly discuss the next steps you need to take so you can begin investing soon. And we’ll also go over some useful research tips to start you off on the right foot for your first investment.
The stock market is where public companies list their shares (you can consider shares partial ownership in a company) for sale to the common public. Stock exchanges provide a platform for investors and traders to buy and sell these shares along with a host of other financial and investment products like Futures, Options, etc. There are two major Stock Exchanges in India that you can trade on, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Share prices fluctuate throughout each trading session until the next as shares are continually bought and sold.
There are 2 major ways you generate income in the Stock Market. One is through profit from the trade and the other is from dividends.
So for instance, say you purchased 100 shares of Tata Motors at the price of 300 INR per share. The next day the share price reaches 320 INR so you decide to sell the 100 shares. The difference you receive, in this case, 2000 INR becomes your profit with a small, negligible percentage paid as commission to your broker. In this case, you opened and closed the trade in one day. You can use a similar strategy over the long run and buy a share today and maybe sell it after a few years when the price has grown manifolds.
Dividends are a distribution of the profits the company makes to its shareholders from time to time. Say, you own shares in Tata Motors and the company decides to allocate profits for dividends, you would receive an amount proportional to the number of shares you own. In this case, you don’t need to sell any shares to generate income.
What Is A Trading & Demat Account?
To begin trading in any financial securities in India, you need to open a Demat Account and/or a Trading Account. Yes, there is a difference between the two.
A Demat Account is for holding stocks, mutual funds, bonds, other Exchange Traded Funds like currency, and securities like options. Before you open a trading account, you need to first open your Demat Account. A Trading Account, as the name suggests, is an account that is used for buying and selling shares on the stock exchange. To activate your trading account you will need to link it to your Bank and your Demat Account. Linking it with the bank account will allow you to invest or withdraw money and linking to the Demat account will allow you to hold the securities that you have bought.
Useful Research Tips
Here are some useful tips on how to analyze the stock market so you can make informed trading decisions:
- Research the reputation and public image of the company.
- Work with reliable Intermediaries.
- Research the company’s current financial standing and project outlooks thoroughly before trading.
- Read Books and Articles.
- Follow the news on major investors.
BOTTOM LINE
Trading in the stock market can be risky, but it is tremendously rewarding. And though it may be complicated, with practice and patience everyone gets better. Another thing that can really help you is seeking out professional consultancies with years of practice.
