Investing in the stock market can be difficult, especially as a beginner. If you want to invest in stocks, you should keep in mind that there are two types of stock markets: primary and secondary stock markets.
investing in the primary stock market
Investing in the primary stock market is through an initial public offering (IPO). After a company receives all the applications made for IPO by investors, the applications are counted and shares are allotted based on demand and availability. To invest in both primary and secondary markets, you must have a demat account which holds electronic copies of your shares. Apart from this, trading account is also necessary which will help in buying and selling of shares online.
In rare cases, it is also possible for the merchant to apply directly from his bank account. IPO application through net banking has been made easy through a process supported by Blocked Amount (ASBA).
As per the ASBA procedure, if someone applies for shares worth ₹1 lakh instead of being sent to the company, the amount will be blocked in their bank account. Once you have received the allotment of shares, the exact amount will be debited along with the balance amount. All applications sent to IPO are required to follow this protocol. Once the shares are allotted to the traders, they are listed on the stock exchange, and you can start trading them within a week.
investing in the secondary stock market
Secondary stock market investment or trading refers to the regular buying and selling of shares or shares. There are a few simple steps you need to follow before you start investing in the secondary stock market.
Step 1: Open Demat and Trading Account.
This is the starting point for investing in the secondary market. Both these accounts should be linked to an already existing bank account for seamless transactions.
Step 2: Selection of Shares.
Log in to your trading account and select the shares you wish to sell or buy. Make sure you have the required amount in your account to buy those shares.
Step 3: Select the Price Point
Decide the price at which you want to buy or sell the shares. Wait for the buyer or seller to respond to that request.
Step 4: Complete the transaction
Once the transaction is complete, you receive money for the shares or the shares you bought or sold.
Make sure you are aware of the duration for which you stay invested and the financial goals you want to achieve through your investments.
Documents required to open Demat/Trading Account
To start investing in the stock market, you must have the following documents:
- pan card
- Aadhar card
- Name on the check canceled from their active bank account showing IFSC Code, Account Number, Account Holder Name and Signature.
- Documents detailing that the applicant earns a steady income.
- Proof of address based on the list of documents accepted by your broker, depository participant or bank
- Passport size photograph of the applicant.
Things to keep in mind before investing
Although stock trading is not as difficult as it sounds, in the long term it is possible to be swept away by the world of trading without being rewarded by it. To prevent this result, keep the following in mind before investing:
1. Diversify Your Portfolio
A diversified portfolio is a healthy portfolio. If a particular asset class dominates your portfolio, it will not offer a steady stream of money your way when that instrument is going through a low patch. To offset the short duration of an asset class, financial advisors recommend adding alternative asset classes. For example, equities are often offset with investments in bonds or other debt instruments. This balance in a portfolio can protect against periods of market crisis.
2. Understand Your Investor Profile
Your investor profile can reveal which instruments best suit your risk appetite. This allows you to be sure that you are taking the most appropriate risk for your lifestyle.
3. Create an Investment Plan
If you have an investment plan that outlines how much revenue you want to generate from your investments and how much you potentially need to stay invested to earn that amount, you can avoid potential losses down the line. can. can do. What can we do. ,
When it comes to investing in the stock market, there are a few important things to keep in mind. These include planning your investments, understanding your risk appetite and ensuring that you go for diversification in your portfolio. If you are finding it difficult to choose the right stocks or plan your investments and target according to your acceptable level of risk, reach out to our expert traders at IIFL and avail our stock recommendation services now!