How to Buy Shares?
If you are worried about share trading or investing in the share market, let us tell you that you are not the only one. New investors with limited knowledge are scared of losing their entire or part of their portfolio. However, with knowledge and disciplined investment, the risk can be mitigated and share trading can prove to be one of the most profitable investments to build one’s investment portfolio in a healthy manner.
What are stocks then?
Before moving on to answering how to buy shares, it might pay off to understand what are shares and why to buy them. It is one of the ways to invest and grow your capital. If done well, stocks can beat many other investible instruments in returns.
There are quite a few other perks of buying shares apart from attractive returns. For starters, you become a fractional owner of the company, if the company does well, you can receive bonuses in the form of additional shares or dividends and so on. Stocks or shares of a company are a part of their ownership, which gives the shareholders a right to partake in the profit (and loss) of the company and a right to vote in the shareholder meetings.
Before you can buy shares online, a company must be listed on the stock exchanges. Companies first must declare IPO or Initial Public Offering and get listed on the stock exchanges. Then you can buy shares online from either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). You can then place an order via your broker to buy or sell the shares. The below steps will answer how to buy shares online and at the same time, how to buy shares for beginners.
How to buy and sell shares for beginners?
If you are pondering over how to buy shares, there are two primary ways of doing so.
• You can buy and sell your shares with the help of a broker.
• You can buy and sell your shares with the help of a financial institution, that offers seamless integration with a Demat account. In this case, the bank or the NBFC acts as your broker.
Buy shares in India for beginners
For your question on how to buy shares, here are all the steps involved.
1. Find a broker
Numerous firms are offering you services when it comes to buying and selling of stocks or shares. It is worth spending some time on zeroing down a broker before you start buying or selling stocks. You can consider factors such as SEBI registration (securities and exchange board of India), membership of stock exchanges, brokerage costs, etc. before deciding.
2. PAN Card
The next step in how to buy shares online in India involves your PAN card. You are obliged to provide your PAN card number for all financial transactions. If you do not have a PAN card, it is time that you get one at the earliest. Without a PAN card, you will not be able to invest in the stock market.
3. Open demat and trading account
As long as we are answering how to buy and sell shares, the first and foremost requirement is a demat and a trading account. The demat account is a placeholder where all your stocks and shares will be held electronically. You can think of it as a bank for your shares. Where you can deposit (buy) new shares or withdraw (sell) existing shares.
The two major depositories in the country are NSDL and CSDL. You can open demat and trading accounts with a broker like IndiaNivesh Securities Ltd.
4. Knowing your depository
There are two primary depositories in the country. They act as a bridge between you, the company whose shares you want to buy and other shareholders. The depositories ensure that you have access to seamless paper-less transactions. These depositories transact the shares via agents known as depository participants (DP). And a DP can either be a bank, a broker or a financial institution.
5. Buy or Sell Shares
Your broker acts as the connection between you and the buying or selling of shares. How to buy shares? You let your broker know the number of shares that you want to buy, the price at which you wish to buy them and the number of shares also. They will then purchase the shares on your behalf.
Of course, there is a time limit until which the orders are valid. Post which, the orders are canceled, and you will have to place fresh orders. The same process applies to the selling of shares also.
If you are wondering how to buy shares of a company that you always wanted to, here are some easy steps to do so after the steps mentioned above are fulfilled.
• Keep the money in your savings account that is linked to your demat and trading account.
• Finalize which shares you want to buy, either using an analysis method or recommendation.
• Place an order for buying shares at a specific price point.
• Keep reviewing your positions regularly.
The steps to buy shares in India for beginners remain the same. During the initial days, you can take the recommendations provided by the research team of brokers, before you come up with your method of buying or selling.
If you are wondering how to buy shares online, there are several brokers or banks with whom you can register and create a demat account. And then you can follow the above steps. There are two major ways in which you can earn money in the stock market.
Firstly, buy a stock at a lower price and sell the same at a higher price. Easier said than done, as you would never know when the price is low or high even with the price-earning ratio calculated. The easier option is to invest in good-quality stocks of healthy companies and hold it for a longer tenure.
Alternatively, if you hold on to shares, companies might pay you dividends. They will first trace who are the shareholders either through NDSL or CSDL and deposit the dividend amount directly to your account.
Consider this example, you buy 100 shares of a company AS Technologies at INR 250 each. If the price of the shares were to reach INR 350, you would make a profit of INR 100 per share i.e. INR 10,000.
If the company is doing well and they declare dividends at INR 10 per share, the company will deposit INR 1,000 for the shares that you hold.
The stock market is vastly operated electronically, thus ensuring that you do not have to worry about how to buy and sell shares or how the share market works. You can simply follow the steps mentioned above and your ‘how to buy shares online’ question will be answered.
Though buying or selling of shares or even the stock market comes with inherent risks, the results in the form of potential returns are quite rewarding. Experts from IndiaNivesh will be able to guide you to understand the best way to invest in the share market systematically while ensuring operational ease. Depending on your risk appetite and financial goal, our experts will aid your share market investments for a healthy portfolio in the long run.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.