How to invest in Indian stock market: Today we will discuss in detail how a new investor can earn a huge profit by investing his hard earned money in the stock market.
A big part of our population is still afraid to invest in the stock market, but in a few years the number of people investing is very large, still there are many people who do not know how to invest in the stock market.
So today we will tell you through this article how you can invest in the stock market.
In this article, we will try to give all the information related to investment, so you are requested to read this article till the end so that you can understand all the information easily.
How to Invest in Share Market in India
To invest in the Indian stock market, you will need the following items-
- Bank account
- Trading Account and Demat Account
- Computer or laptop or mobile
- Internet connection
To open a demat account and trading account, you will need the following documents-
- Pan Card
- Aadhar card
- Canceled check or bank statement or passbook
- passport size photo
- You can open your bank account in any government or private bank.
- PAN card is an essential document for investing in the stock market and for opening your demat account.
Some important guidelines before investing in share market
People invest in the stock market with the aim of earning good profits because here you get more returns than FD (Fixed Deposit) of any bank.
But in stock market you have to invest for a long time, you will find many examples of people.
If you have earned a lot of money from the stock market, then some people will also meet people who have lost their money.
Below are some very important things that you must consider, if you are thinking of investing in the stock market-
If you have any type of debt where you have to pay a lot of interest, then it is better to pay off that debt first than investing in the stock market.
Never invest the money you need in the stock market, for example if you have money to pay the rent of your house, money to marry your daughter or sister, money for treatment. If you have money for your studies, then do not invest this money in the stock market at all.
You should always invest that money, which by investing does not cause any kind of trouble on you immediately. Therefore, it is advised that after your needs, you should try to invest the money which is left with you and not the money you need.
Whenever you are thinking of investing in the stock market, you must have enough money that you can live comfortably for 6 months because you may have invested whatever money you have and suddenly your If you lost your job or any kind of trouble comes, then you should always have 6 months salary in the form of emergency fund for this.
You should not invest all your money in one go, you should invest only a part of your total savings in one go.
How to invest in Indian stock market?
Also Read :-
What is IPO (Initial Public Offering) – A Detailed Overview
Why do you want to invest?
Different people come to the stock market with different purposes, like some people come with the aim of increasing their money manifold and making good profit on it.
while some people think of their investment as a means of other income, invest in the stock market. It is like taking dividends, or some people start investing for the purpose of buying a car or house, then some people start investing without any purpose.
That is to say, whenever you start investing, your objective should be fixed. With a definite objective, you can get an idea of how much amount and for how long you will have to invest.
How to invest in share market?
When you must have understood why you should invest, now the next question in front of you is how to invest in share market in India? You can think of investing systematically.
Some people invest a lumpsum amount in the stock market at one go, which is called lumpsum investment, while some go on investing a small amount every month which is called SIP investment.
You can choose any method according to your convenience.
Some people believe that when you have a lot of money, you will be able to invest in the stock market only, but this is completely wrong, now you can start your investment even with a small amount of Rs 500.
Different person have different income, but after completing their needs, people invest the amount that is left, it is up to you, you invest 20% or 30% of your income.
If you invest even after saving 4 – 5 rupees a month, it will convert you into a huge amount in the long run.
Where can I get information about investments?
Today we are living in the world of internet, where it has become very easy to get information about anything. Apart from this, if you are fond of reading books, then there are many books related to investment, which you can read and earn a lot of knowledge about investing.
Below are some of the best books related to investing, which you must read.
- The Intelligent Investor by Benjamin Graham
- One up on wall street by Peter Lynch
- Common stocks and uncommon profits by Philip Fisher
- The Dhandho Investor by Mohnish Pabrai
- The little book that beats the market by Joel Greenblatt
· Flirting with Stocks: Stock Market Investing for Beginners- Anil Lamba
· Money Master the game- Tony Robbins
· Fundamental Analysis- Raghu Palat
· Let’s Talk Money: You’ve Worked Hard for It, Now Make It Work for You
· How to make money in stocks- William O Neil
· How I made $2 Million in the Stock Market- Nicolas Darvis
· Rich Dad’s Guide to Investing- Robert Kiyosaki
Translated in Hindi
- The Intelligent Investor by Benjamin Graham
One up on wall street by Peter Lynch
Apart from this, there are many good books which you should read, which will bring confidence and positive energy in you and by reading these books, you will get a kind of inspiration which will change your life, you can get information about these books from here.
Where to open my Demat account and Trading account to invest?
To invest, you need a demat account and trading account, which you can open with any broker, then the question comes in front of us, which broker should we choose.
How to choose your stockbroker?
There are two types of stock brokers working in the Indian stock market –
full service brokers
As the name suggests, full service brokers provide additional features as compared to discount brokers such as they publish their research and reports on different stocks from time to time and advise on which stocks to invest when or not.
They have branches in different cities, where you can get many types of investment related information. They have a good support system who are ready to assist their clients at any time.
They offer the facility to invest in Forex, Mutual Funds, IPOs, Bonds and Insurance and usually charge higher brokerage than discount brokers.
Some of the famous full service brokers are icicidirect, sharekhan, kotak securities, HDFC securities, Motilal Oswal etc.
Till some time ago, full service brokers dominated the Indian stock market, but after the arrival of discount brokers, people started opening their demat account rapidly with discount brokers.
Discount brokers charge low brokerage (amount charged while buying shares). Usually discount brokers give you a good trading platform with a demat account but they do not provide any kind of research reports or investment related advice like full service brokers.
Usually they have a main office from where they conduct all their work, you can get help from them online by email or by phone.
Some of the most popular discount brokers are Zerodha, Upstox, 5Paisa etc.
Currently Zerodha has the maximum number of clients and icicidirect’s name comes at number two.
How to choose shares to invest
It is very difficult for a new investor in which stock to invest his money. Initially, you should choose the stock whose product you use in your everyday life. In the beginning, always give priority to such stocks whose products are around you.
For example, if you have a two wheeler out there then you can think of Bajaj or Eicher Motor’s Royal Enfield. If you look at four wheelers, you can see Maruti, if you look at beauty products, you can see Hindustan Unilever for shampoo, soap, oil, cream, etc.
Prestige cooker used in utensils. You can see that the company that manufactures magi which is used at home in the food item is Nestle India, the biscuits you use like Parle, Goodday, this Britannia company manufactures.
Similarly, you will get hundreds of such products, find out about the parent company that makes them, whether it is listed in the stock market or not.
Before investing, find out about the company of that share, how it is doing its work, whether its products are being sold in the market or not, whether the company is making profit or not, how much debt is there on the company, if there is a loan, then the company is its Is paying or not, whether the products of that company will be in the market in future or not, how will the company perform in the coming time, etc.
That’s why initially you should invest your money in a company that you understand.
In the beginning, a new investor should choose those companies which have been doing their business for many years and they are expected to do good business even further.
Once you start knowing about companies, then gradually you will start understanding about different sectors.
When should you sell the stock?
When you are invested in a company and the company is consistently giving you good profits, then you would like to stay invested in that company, but if you need money due to some unforeseen circumstances, then you can sell your shares.
If the fundamentals of a company are changing and you feel that that company will no longer be able to run as before or will not be able to perform well in the future, then you can sell the shares of that company.
When you feel that any other company which can give you good profit in future than the first company you have invested in and is getting cheaper price then you can move from first company to second company.
When you have started investing for a specific purpose (like buying there, buying a house etc.) and your investment period is over, then you can withdraw your invested amount.
Some very important things related to investment: –
1. Whenever you start investing, do not invest all your money at once. A new investor should start investing with little money in the beginning. In the beginning you can start investing for learning. As you gain experience you can increase your investment amount.
2. You should never invest all your money in any one share or company of any one sector. The shares that you have bought in your list and they should be from different sectors, we call this diversified portfolio.
For example, if there is a recession in one sector, then the shares of the same sector will fall in your portfolio, the rest of the shares will fall less or less.
3 A new investor should invest in such companies in their initial days which are very strong fundamentally and have been trading in the market for a long time, such companies are the leaders of their sector. These are also called bluechip stocks, you can get information about bluechip companies by reading this article (10 best bluechip companies in India).
4 As soon as you open a demat account in the stock market, from the next day you will start getting phone calls from advisory companies, they will try to entice you and ask to take their service. Never invest on the advice of such advisory companies, otherwise your money may sink.
Anyway, we should not invest on the advice of others, if a friend advises you of a stock, then first do complete research about that stock yourself and you should invest in that share if you find it right.
5 There are more than 5 thousand companies listed in the Indian stock market, which do business in different sectors, the new investor should always choose such a company whose business they understand.
For example, Bata is a shoe manufacturing company, an investor can find out how many shoes the company sold this year, how much profit it made, whether there is a demand for its shoes in the market or not, whether the price of raw materials used in it has increased or decreased. But if you choose any chemical manufacturing company, then you will find it difficult to know about their business.
6 Never enter the stock market overnight with the aim of becoming a millionaire. Here you always have to invest in a systematic way in bank FD, interest is 6%, average in mutual funds is 12%, so you have to choose such stock which gives more profit than them, only then your money will make a good profit in the long term.
7 Make a habit of investing continuously in the stock market and if possible, increase the amount of investment a little every year, after a few years you will start seeing its benefits.
Nirmal is a NISM Certified Derivative Trader & the Founder of InvestandEarn.net (Financial Blog). He entered the world of Equity research to explore his interests in financial markets having 5+ Years of Experience in Share Market Trading & Investing. Nirmal frequently writes about Share Market Trading & Investment and publishes his personal view on the market. Drop him a mail at email@example.com.