A beginner’s guide to investing in the stock market
New investors often wonder about how to invest in stocks. Stock trading today has become one of the fastest ways to create a corpus. More and more young investors are learning the importance of stock trading and viewing it as a better option for creating savings as opposed to conventional means of investments such as recurring or fixed deposits, since the return on investment here is faster and better. However, like all investments, stock trading also has a certain element of risk attached to it, which is why you must consider your risk appetite before you make your investments. Truly, investing in stocks for beginners can be quite a challenge. So, here are some important things you need to know.
You need a demat account
Whether you wish to trade in stock, bonds, mutual funds, or any other market instruments, you need to open a demat account. It is a wise choice to choose an investment company to open this account. Once you have an active demat account, you can start share trading online. Moreover, the investment company also provides regular research and performance reports about different stock options, which can help you, choose scripts based on your investment objectives.
The trading process
The share trading process is simple and efficient. It works in two simple stages
When you purchase units of shares from a certain company using your trading account, the money (or investment amount) is transferred from your bank account and the share units are credited into your demat account.
When you decide to sell units of shares to book your profit (or cover losses); the share is transferred out of your demat account, back into the share market whereas the sums resulting from this transaction are credited directly into your bank account.
How to invest in stocks – learn the stock trading process
As mentioned above, you need to open a demat account. You can choose a reputed investment company like Angel Broking Limited to open your demat account. You also need a trading account. The demat account should be linked to your bank account to transfer sums from selling and purchasing shares, online. You need to familiarize yourself with the user interface as well. You also get access to various trading tools.
Learn the important trading terms before you begin investing in the stock market. This will help you understand the research reports or watch news stories related to your stock picks.
Use an online simulator and play virtual stock market games to understanding investment strategies and increase your share market knowledge. Online simulators can give you a very real, virtual experience of how stock markets work.
While considering investing in stocks for beginners, don’t underestimate the importance of investment strategies. Having a strategy in place is incredibly important – you need to decide the investment amount and the period of time for which you can hold the investment. You can then schedule your orders to purchase or sell shares based on your cash limits and investment strategies.
Don’t fall for the ‘high-risk, high-reward’ philosophy, at least as a beginner investing in the stock market.
You must also consider the brokerage charges. This includes
- Charges associated with actual brokerage
- Opening the trading and demat accounts, and its annual maintenance
- Fund transfer charges
- Charges for research and additional services provided.
A good investment company may levy the while providing you with all the above mentioned services that can make the entire investment process easy. You may also opt for services of investment advisors for a specific fee.