A Beginner's Guide To Sharemarket

 

A BEGINNER'S GUIDE TO SHAREMARKET

Stock investing can help you multiply your money and provide you with a remarkably high rate of returns over time. Indians, being as financially astute as they are, have realised this. Recent studies claim that India's brokerage account population has increased by a startling 40%! In India, there are currently thought to be 83 lakh brokerage accounts.

According to SEBI statistics, Indians currently use various saving methods than those that were popular in the past. People started online demat and trading accounts nowadays to invest in alternative assets like stocks, whereas in the past they would invest in assets like gold and real estate. Due to volatility, many prospective investors are still wary of trading on the stock market. But volatility can be reduced to a trivial amount by following a few simple guidelines. Consequently, before making his initial investment, a novice trader should bear the following things in mind.

THE DIFFERENT WAYS TO INVEST IN THE STOCK MARKET

INDEX FUNDS

You have the option to invest in index funds, which follow stock indices like the S&P 500, in addition to purchasing individual equities. We often favour passively managed funds over actively managed ones (although there are certainly exceptions). The fees of index funds are often far cheaper, and they almost always reflect the long-term performance of the underlying indices. The S&P 500 has generated total returns that have averaged 10% over time, and performance like this can generate sizable wealth over time.

ROBO-ADVISORS

The robo-advisor is a last choice that has gained enormous appeal in recent years. A brokerage known as a robo-advisor essentially invests your money on your behalf in an index fund portfolio that is suitable for your age, risk tolerance, and investment objectives. A robo-advisor may choose your assets for you, and many of them will also optimise your tax efficiency and make adjustments automatically over time.

INDIVIDUAL STOCKS

Only if you have the time and motivation to thoroughly examine and continuously assess stocks can you invest in individual equities. We wholeheartedly urge you to do this if that's the case. It is definitely conceivable for a wise and persistent investor to outperform the market over time. On the other hand, there is absolutely nothing wrong with adopting a more passive approach if activities such as reading quarterly profits reports and performing simple mathematical calculations don't sound exciting.

WHAT IS DEMAT ACCOUNT?

Your financial securities are stored electronically in a demat account. It functions similarly to a bank account, except that it is used to store your financial assets, such as stocks, bonds, government securities, mutual funds, and other asset classes. You can store and keep track of all of your investments in one place online with a demat account.

HOW TO OPEN DEMAT ACCOUNT

Opening a demat account is a straightforward process. What you must do is as follows: 

Fill out the account opening form by visiting the DP office or online. You need to provide copies of your PAN card, Aadhaar card, identification evidence, address proof, and passport-sized photos in order to register a demat account. Go over the terms and conditions materials in detail. The physical verification comes next. A representative from the DP will typically visit your home. You might be able to complete the verification online using Aadhaar, though, according to certain DPs. You will be given a client ID, a demat account number, and a password after the procedures are finished. Log in right now to begin investing. The demat account, however, only.

PROCESS OF TRADING

Your bank account is debited when you use your trading account to purchase shares, which are then transferred to your Demat account. Shares that you sell are moved from your Demat account onto the stock market. Your bank account will be given access to the transaction's proceeds.

TWO TYPES OF TRADING

In intraday or day trading, you must close off any open positions prior to the market closing. You can use margins, or financing given by the broker to boost your exposure in the stock market, for intraday trading. It enables you to buy/sell more stocks than would otherwise be possible without investing a significant amount of money.

Delivery trading is purchasing the stocks and keeping them for a longer period of time than one day, taking delivery of them. You must have the money for your share market investments because it does not use margins. It is a safer way to invest in the Indian stock market.

BULL MARKET

A bull market is a state of the market in which there is a broad tendency toward increase. This is distinguished by a general sense of optimism among investors and a belief that prices will continue to climb. During a bull market, stock values significantly increase. Before and after this time, a significant decrease in stock prices (usually 20%) is also noticeable.

BEAR MARKET

A bear market is a state of the market in which there is a broad downward trend experienced by all market participants. When investors expect a drop in stock prices, this is characterised by a generalised pessimism and increasing selling activity. During a bull market, there is a significant decline in stock values. The market is deemed to have entered the bear phase when there has been a loss of around 20% from the top over a period of many months.

KNOW YOUR RIGHTS

Make sure a broker is registered with SEBI and that its credentials back up any promises made before engaging into a relationship with them. Make sure you obtain a "Statement of Accounts" for all money and securities settled each quarter as well as written confirmation of each deposit you make.

CONCLUSION

For beginners, buying stocks is a rather straightforward procedure. Prior to beginning your stock market investments, it is important to be informed of your investment horizon and financial objectives. As a novice investor, reducing risk may be greatly aided by having access to cutting-edge tools, professional advice, and in-depth real-time stock research data. Create a trading and demat account with IIFL today to take advantage of these advantages and more.