A complete Guide for beginner- How to invest in share market

  

A complete Guide for beginner- How to invest in share market

                                  

Welcome to my blog Gyani baba Official once again, Today we are going to talk about very interesting topic from years, which is considered as a Taboo from majority of population in India, Stock Market. But before let me ask you first , Do you really want to earn money,,,? of course you do, again How much,

I already know most of you have already grown through these kind of blogs and must be wondering what new here, Well I will create a road map from scratch that will explain you briefly the process about How to invest in share market, How to invest in share market online, How in invest in share Market India, step by step from creating an account to choosing a stock and there will be a series of blog that you can follow and learn the tips and trick of share market.

      

What is the Share Market?

                                     

Before we try to understand about the share market, let us understand shares.

 

What are shares 

Imagine a company running its business and earning profits and looking for ways to expand.

It decides to launch a new type of product that involves a huge factory installation and skilled workers – a huge investment.

The company does not have the required money to create this set-up. Hence, it will try to look for a loan from a bank or any financial institution for raising money in some other way that they don’t have to pay interest on the raised sum.

One way for this, is to add partners by asking them to contribute a specific amount towards the capital of the company.

A company can do this by issuing shares. When a company decides to raise funds, it issues shares to people. The number of shares held by you defines the percentage of holding that you have in the company.

So, if a company’s net worth is Rs.15 lakhs and you hold shares worth Rs.1.5 lakh, then you are a 10% partner in the company. You will be entitled to receive a share of the 10% of profits made by the company.

So, if you are a partner in XYZ Ltd, you can shift your rights in the company to a another party by informing the company about the same.

Let say that you want to become a partner in ICICI Bank Ltd. Where would you go to find its shares? The company issues shares only when it wants to raise funds. How do you find its existing shareholders and at what price do you buy the shares?

 

Intermediaries in a share market

When you purchase shares of a particular company from it another shareholder, there are many things that can go wrong. Hence, every country has a regulatory organization that ensures that the stock transactions are smooth and fraud less.

 

In India, this organization is the Securities and Exchanges Board of India (SEBI). This organization has defined a process for share transactions to ensure maximum protection and security to all investors that include the following intermediaries:

 

SEBI has instructed that all transactions in a stock exchange must be done through a stockbroker registered with the exchange.

 

Depository and Depository Participant – Initially, shares used to be allotted in the form of physical certificates, this has now given way to electronic or dematerialized shares. Now, you need a bank account to keep a record of your dematerialized money, and  you need a Demat account for your dematerialized shares. This account is provided by a depository participant.

Bank – You need money to buy shares of any company and a bank account to receive sales money. Hence, a bank is an essential requirement in share transactions.

Clearing Corporation – This Cooperation ensures that all transactions are cleared successfully.

To enable this, regulators around the world developed a place where investors could buy and sell shares of any company listed on the stock exchange.

 

The marketplace has a process with numerous mediators that ensures that the company is informed about the change in shareholder, the buyer receives the shareholdings, and the seller receives the money. This is the Share Market.

 

When a company issues shares to the public for the very first time, it launches an Initial Public Offering (IPO) by determining the share price.

 

This is called primary share market where you purchase the shares directly from the company during an IPO. As soon as the company completes issuing shares through the IPO, they will be listed on a stock exchange. This is the secondary market where you can trade it shares to other investors.

Steps to follow to learn how to invest in Share Market - Beginner.

1.  Demat Account

In order to invest in share market, one must have a Demat account through which you can buy or sell shares, Now a days, you can open Demat account online through your phone and computer by following a simple process, i am providing you linkf on few website you can head their and open your Demat account for free, 

Angel broking

Zerotha

UpStox

  Documents you will need to open in Demat account in order to invest in share market:

• Your PAN Card
• Your Aadhaar Card
• Your name on a canceled cheque from your active bank account
• A proof of your residence based on a list of documents that have been accepted by your broker, depository participant, or bank
• Documents detailing that you earn an income

Passport-sized photographs of you

I am also attaching a Video which you can watch for you understanding an reference.

                               

Things to Keep in Mind Before Investing.

 

Now, I Hope you are clear with the basics, let us see what are the other things that you need to consider before investing.

1.     Your Investor Profile.

 

Every investor is distinctive. Hence, you must make sure that you invest based on your investor profile. There are three key factors that can help you to recognize your profile:

Financial goals – Identify your financial goals. What are you trying to achieve? Retirement amount? Fund your world tour? Planning for a marriage? buying a house? These goals will assist you get clarity on how and in which stocks you should to invest in.

 

Risk tolerance – If you invest in a strong company like Maruti or Cipla, then the price will not fluctuate a lot. It will be comparatively stable. On the other hand, if you invest in small companies that seems encouraging, then every small accomplishment will boost the price of its share and failure will result in crash. You need to find out how much volatility you can handle without frightening and making wrong decisions.

 

Investment horizon – Stock investments tend to offer good profit over a period of 10-12 years (long-term). Decide the period for which you want to stay invested in a particular share.

2. Understand the difference between trading and Investment 

 Difference between trading and investing -

Once all the documents are submitted, the DP will cross-check the submitted document and then provide you with your account login details. With those details, you can enter into your account and start trading. There are two distinct strategies that you can opt for:

 a) Trading:

 In this plan, you will aim to turn short-term rate fluctuations into your profits. This option is mostly followed by intraday traders who clear all their positions by the EOD. The aim here is to take large, huge positions and look to sell upon the smallest or price fluctuations.

 b) Investing:

 Investing means to hold your positions for higher periods of time. The aim here is to find undervalued companies, buy their stock, and maintain your position in them through the provisional market ups and downs.

and here I am going to be focusing on Investing because my plan is to make you rich over long term not make short time profits.

                                             

                         

3. Conducting background and detailed research about a company -

Before buying a company’s stock, it is important to conduct detailed research and dig into company’s background. A trader should consider the following factors:

a) The company’s revenue model

b) The company’s management stability

c) The company’s competitors, etc.