How to invest in the Share Market?

Summary: Unlock the potential of investing in the stock market for long-term gains. Learn about stock market types and how to invest. Click here!

05 Apr 2022 by Team FinFIRST

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The share market can help you create long-term wealth, but you must follow basic rules to succeed as a stock market investor.

Investing in the stock market can be lucrative in the long term. Despite its volatile nature, the capital market rarely gives negative returns over time. However, that does not mean you should invest in the markets blindly. Not having a plan can prove detrimental and lead to heavy losses. You should stick to a strategy that works for you.

If you haven't found a strategy yet, focus on learning about the markets. This article will give you a brief understanding of the stock markets and how you can invest in them.

What is the share market?

Investors and traders buy and sell financial securities on stock exchanges. These exchanges together make up the share market. By purchasing a share, you become an investor in a listed company.

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How to invest in a share market?

You cannot buy or sell in the stock market on your own. You must do it through a licensed broker. Here's how you can do it:

Open a Demat account with a stockbroker to begin investing. A Demat account has the records of your current and past holdings. When you buy a share, it is deposited in your Demat account.
To create a trading and Demat account, you must present Know Your Customer (KYC) documentation, including verification using government-issued identification cards such as your PAN card or Aadhaar card.
Most brokers and brokerage platforms offer online KYC. It allows you to open an account quickly by electronically providing your verification information.
After your account is opened, you can trade with your broker online through a portal or phone.

Types of share markets in India

There are two types of share markets you can invest in in India. These are the primary and secondary share markets.

1. Primary share market

When privately-held companies want to go public, they offer shares in their company through an Initial Public Offering (IPO). IPOs are part of the primary market. New bond issues and other securities offered for the first time are also part of the primary share market.

2. Secondary share market

When traders talk about stock market investments, they usually refer to the secondary market. This includes stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Securities such as stocks and exchange-traded funds (ETFs) are traded daily on the secondary share market.

As the firm grows, the cost of its shares increases, leading to incremental returns.

How to invest in the stock market for beginners?

Investing in a stock market as a beginner can be taxing. But here are some guidelines that can help you get started:

1. Create a diverse portfolio

Diversity is critical for success in the stock market. You must ensure that you have equal exposure to different sectors. If a single sector dominates your portfolio, you could be on the backfoot if the industry does not perform.

2. Define your risk appetite

Before you begin investing in the share market, evaluate your behaviour. Define your risk appetite and invest in companies based on it. If you are risk-averse, invest in large-cap companies as they are relatively stable. However, if you are willing to take risks, you can invest in small and midcap companies.

3. Have a plan

If you have an investing plan, such as the amount of money you want to generate from your investments and the timeframe you need to stay invested, you can prevent potential issues down the road.

Investing in the stock market is not easy. However, you can succeed by strategizing your investments, determining your risk tolerance, and ensuring a diverse portfolio. You need a Demat account, though, to begin investing in the market. IDFC FIRST Bank and Zerodha, India's largest broker, offer the IDFC FIRST 3-in-1 Account (Savings + Trading + Demat account). It connects your trading account to your bank account for one-click transfers that are simple and real-time.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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