stock market investment guide for beginners

135

The stock market is a place where shares are publicly issued and traded. A share serves as a tradable document that validates your ownership of a company. The stock market is also the place where buyers and sellers exchange these documents. To facilitate exchange for the public, a formal market has been developed for investors to buy and sell their shares.

stock market investing for beginners
To invest in publicly listed stocks in the market, you must meet the following requirements:

1. Personal Documents

  • pan card
  • Aadhar card
  • Name on check canceled from your active bank account
  • Proof of residence based on the list of documents accepted by your stockbroker, depository participant or bank
  • Account Details
  • passport size photo

2. Demat Account

A demat account acts as an electronic house for your shares. Demat account opening is a hassle free process which is conducted either online or offline with the help of a depository participant. Many banks also provide demat account services to their investors.

3. Trading Account
A demat account and trading account go hand in hand. A trading account is used to buy and sell securities that you wish to trade in the stock market. Both demat and trading account are mandatory for investing in share market.

Bombay Stock Exchange and National Stock Exchange are the primary exchanges where stocks are listed. However, some stocks may only be available on one of these exchanges. Therefore, it is advised that you open your trading account with a depository participant who offers trading on both BSE and NSE.

4. Linked Bank Account
Linking a bank account to your trading account ensures smooth flow of funds in and out of your account during your trading. This is mandated by most of the brokers with whom you wish to open a demat and trading account.

Currently, you can find two-in-one accounts that work as both a demat account and a trading account. Some brokers also offer a three-in-one account where one can trade directly from their bank account and store their securities at the same location.

investment process

The investment process is different when choosing to invest in the primary stock market as compared to the secondary stock market.

1. Investing in the Primary Stock Market
Investments are made in the primary stock market through an initial public offering (IPO). Once all the applications for IPO are received and considered by the company, the shares are allotted to the investors based on demand and availability.

IPO application is simplified through an application backed by Amount Blocked (ASBA) through your net banking account. As an example of this process, if you have applied for shares worth ₹1 lakh, the amount will be blocked in your bank account instead of being sent directly to the company.

Once your shares are allotted, the exact amount is debited with the balance being issued. All IPO applications have to compulsorily follow this process. Once the shares are allotted, they get listed on the stock exchange, and you can start trading them within a week.

2. Investing in the Secondary Stock Market

The secondary stock market is where the buying and selling of shares takes place between investors. Follow these steps to invest in the secondary stock market:

  • Open a Demat and Trading account using your linked banking account.
  • Log in to that trading account.
  • Select the shares you wish to buy or sell.
  • Make sure you have the required amount in your account to buy the shares.
  • Next, decide the price at which you want to buy or sell a particular share.
  • Wait for the buyer or seller to respond to that request.
  • Complete your stock market transaction by paying and receiving shares or by transferring shares and receiving funds.

Final Words

The process of investing in stocks for beginners is quite simple. It is important to be aware of your investment horizon and financial goals before you start investing in the stock market. As a beginner in the stock market, advanced tools, expert recommendations and detailed real-time stock analysis data at your disposal is a big factor towards reducing risk. To avail these and other benefits, open a Demat and Trading account with IIFL today.