Have you been thinking about buying shares but do not know how to invest money in the share market? Then you have come to the right place. In this article, we will tell you all that you need to know regarding the DOs and DONTs and how to invest in the share market.
Why is an investment in the share market a smart decision?
Many market experts feel that investing in the share market is the only towards building real long-term wealth. Read on to know the top reasons why you should venture into the share market and the benefits associated with it:
• Ownership (at least a certain percentage)
With shares, you gets the twin benefits of dividend and ownership.
• No need for negotiation
In the case of shares, you see clearly what you need to pay. There are no hidden charges or scope for negotiation. This makes the buying process quicker and more transparent. Brokerage or such associated costs are also minimal. Hence, you can be assured that a big chunk of the investment does not go towards associated costs or operational expenses.
• Potential for a higher return
Share markets have the potential to generate a much higher return than conventional investment avenues such as Bank deposits, Fixed Deposits, etc. You just needs to choose the right stock to invest in and be willing to absorb some degree of risk. Investments in the share market bear extremely sweet fruits for you in the long-run.
How to invest in the share market?
Before we answer your question on how to invest money in the share market, you need to know the pre-requisites and procedures involved.
• Identity Proof (PAN Card or Aadhar Card)
To be eligible for investment in the share market, you need to have a PAN Card or an Aadhar Card. These are mandatory documents for the Know Your Customer (KYC) process of SEBI. Also as per the new rules for opening a Demat account, one needs to furnish a canceled cheque along with your bank statement (for the last six months).
It is also important to make sure that the information mentioned in these documents is correct and up-to-date. So, You must check the details such as name spellings, contact details, etc. to ensure there are no issues later.
• Contact a broker
Trading on the share market is not open to all individuals. Only some people are authorised (by the central regulator –SEBI) to perform trading (buying and selling) of securities. These intermediaries are referred to as brokers. They can be individuals, firms or agencies registered with SEBI.
Hence, any interested investor needs to reach out to a broker to invest money in the share markets. They also assist the investors in completing the formalities involved in making investments in the share market.
Brokers levy a service charge or brokerage for rendering their services to the investors.
• Demat and Trading Account
A Demat account is an account that will hold the shares in a non-physical electronic format. The Demat account number needs to be quoted for all stock market transactions to allow electronic settlements. It is mandatory to have a Demat account to trade on the share market. Shares can no longer be held in physical format. Similar to a bank passbook, any transactions (buying or selling) will be debited or credited in the Demat account.
A trading account is used to place the trade (invest or sell) orders in the share market. Its purpose is different than a Demat account. A Demat account acts as the bank in which shares purchased are deposited and shares sold are taken out. It is a storage house. Trading Account, on the other hand, facilitates the trading process and acts as the link between the Demat account and the bank account.
• Unique Identification Number (UIN)
A UIN is required if the value of a single transaction reaches or exceeds Rs. One Lakh. For transactions below that limit, UIN is not needed.
• Depository Participants (DPs)
There are two depositories in India – CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). They act as a link between the listed companies and their shareholders. Depositories issue the shares through authorised agents known as Depository Participants (DPs). DPs can be banks, individual brokers or financial institutions. They are accountable for the final transfer of the securities.
Once you have all the above things in order, you are ready to know how to invest in the share market online. All you need to do is:
1. Scan the market and identify the shares or securities that you would like to invest in. One must ensure that the investment decisions are in line with the goal, investment strategy, risk profile, and investment horizon.
2. Inform the stockbroker about the details of the investment to be made. These include the name of the organisation to invest in, the number of securities to be purchased and the entry price. For instance, you want to purchase 1000 shares of a company that is currently trading at Rs. 750. However, you want to get in at an entry price not more than Rs. 600. You can instruct your broker to invest as soon as the price comes down to that level.
3. In case if any of the buy or sell orders reach their expiry date, the broker informs the investor regarding the same.
4. Once the transaction is complete, it reflects in the Demat account.
5. Dividends on shares held are directly credited to the linked bank account.
Share Market Investment Tips
Here are some share market investment tips to make your experience smooth and fruitful:
• Do not get swayed with promises of guaranteed return. In the share market, there are no minimum or definite returns.
• Check the credentials and track record of the intermediaries that you partner with. One should only deal with intermediaries who have the necessary authorizations and are registered with statutory bodies such as SEBI or stock exchange.
• In the case of securities, "one size fits all" does not hold true. Hence, ensure that the investment decisions are in sync with your risk profile.
• Not everything that shines is gold. Be cautious of securities that exhibit a sudden increase in trading activity or price. Also, before investing in low-priced stocks one must conduct a due-diligence of the concerned company. It is important to make sure that the price fall is justified by internal or external factors.
• Maintain copies of all investment-related documentation (application forms, contract notes, communication to companies, brokers, etc.)
• Do not invest in the share market based on market rumors. Similarly, do not panic sell in case the market goes down. Impulsive decisions are not fruitful for most investors.
• Always check the instructions given to the broker and their understanding of the same.
Now you know everything about how to invest money in the share market. However, make sure you invest adequate time and effort in choosing your broking partner. The right firm or individual can help you make the right decisions in the share market. One name that you can depend on, for these services in IndiaNivesh. Their rich experience and technical expertise enable investors to maximize the potential of their investments. They also conduct extensive research on markets and various players.
So, what are you waiting for? The share market has something for everyone.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Financial and physical health have a lot in common. Both are continuous journeys and not a one-time activity. For instance, it is not enough to reach one’s desired weight but rather maintain it at the same level. Similarly, when it comes to our financial wealth it is not only about earning money. Rather one needs to focus on continuously growing it. Both these journeys become easier and more fruitful when a coach is there is to guide you each step of the way. A physical trainer is to your physical health what a wealth management advisor is to your financial health. What is wealth management?Wealth management is a kind of specialised and customised investment advisory service. It is also referred to as a combination of financial and investment counseling. These services are offered to individuals with high net worth i.e. HNIs. The financial expert who offers these services is known as a wealth manager. Wealth management services in India include services related to accounting, taxation, investment, retirement planning, estate as well as legal planning.Who is considered an HNI in India?An individual who has an investible bank balance of at least Rs. 200 Lakhs (2 crores) is categorised as High Net Worth Individuals. People with an investible surplus of Rs. 25 lakhs (but below 2 crores) are tagged as Emerging HNIs. This is only an indicative figure and can vary from one service provider to another.Wealth Management services in IndiaWealth Management is one of the fastest-growing industries in our country. Numerous factors have contributed to the rapid growth of wealth management products in India. A positive long-term economic potential of the nation, growing income levels, increased consumer awareness and the current low penetration have collectively fueled this growth. A quick look at these factors• Expansion in wealth creationAn Asian Bank report mentioned that India with its 119 billionaires stands just behind the USA and China. This figure is likely to triple in less than a decade. Some of the factors that will lead towards this exponential growth are a spurt in entrepreneurship, a robust educational system, a strong outlook for the IT and ITES sector, increased investment in state-of-the-art asset classes, etc. • Increased awarenessWith the advent of technology, information about new age practices and concepts (such as wealth management products in India) is easily available and accessible. People are more open to seeking help from professional experts to manage and grow their corpus. One key factor behind this increased awareness is also the fact that the high net worth individuals are comparatively younger. • Increase in firms offering wealth management products in IndiaThere is a surge in the number of wealth management service providers in the country. In addition to individual brokers and domestic firms, many global entrants have also forayed into this arena. Though the percentage of HNIs in our country is small when compared to the figures for developed countries, strong growth forecasts coupled with a growing middle class and young population indicate the potential for high asset accumulation soon. India is pegged to become the third-largest global economy by 2030 (according to a Cognizant report). As a result, personal wealth management in India is going to become the need of the hour.As per a recent report published by Capgemini, the wealth management industry is likely to witness a double-digit growth (ranging between 10% and 15%) per year in the coming five years. Key aspects of Wealth Management services in India• Risk AnalysisThe wealth manager analyses the risk-taking capacity of the client by taking into account a host of factors. These include current as well as future financial obligations, investment goals, the stability of income, client personality, etc. Correct risk analysis plays a critical role in formulating a customised investment plan for the client which will meet his/her financial goals.• Asset AllocationAfter the risk analysis, the wealth manager strives to strike the perfect balance between risk and return for the client. The available assets of the client are distributed across the suitable asset categories in sync with their risk quotient and return aspiration. The key asset classes include stocks, debt, real estate, mutual funds, gold, etc.• Investment HorizonA good wealth manager helps in achieving the client’s short-term as well as long-term investment objectives. They offer advisory services that enable the clients to maintain enough liquidity and flexibility to meet their investment goals in the short-term. Additionally, they also work towards securing the financial future of the client and maximise the return on their investments.• Customised Investment ProductsMany wealth managers work closely with the country’s leading banks. As a result, they have access to the entire spectrum of investment products. Sometimes they might even be in a position to offer tailor-made and bespoke investment products as per the client’s requirements. • Continuous market researchWealth management is not a one-time activity that ends with suggesting the right investment avenues or products. Rather it is just the start. Wealth managers continuously scan the market, assess the performance of various products, review the client’s portfolio and try to predict future trends. They apply a host of quantitative and qualitative techniques for this purpose. Additionally, they keep on interacting with the client periodically to analyse if there are any changes in their risk profile, financial obligations, investment goals, etc. Role of a wealth managerWealth Management is principally a simple concept – protect and grow the wealth of the client. However, its execution is a highly complex task. And hence it is done by financial experts known as Wealth Managers. A wealth manager is an expert who makes use of the entire gamut of financial disciplines such as investment / financial advice, accounting and tax-related services, estate planning as well as retirement planning to grow the client’s corpus.Wealth Management Products in IndiaThe product offerings vary from one service provider to another. Though the key products include:• Alternative Asset• Equities• Bonds, debentures, fixed maturity plans• Insurance• Mutual Funds• Loans• PMS (Portfolio management services)• Real Estate Services• Digital Investments• FundraisingWealth Management service providersBroadly speaking, there are three kinds of service providers in the realm of wealth management.• Banks• Brokerage Firms• Boutique Advisory Firms• Individual brokers or sub-brokersSelecting the right advisor is critical. One needs to choose a wealth management service provider who is not only trustworthy and credible but also can offer investment or financial advice as per the client's needs. The alignment of interest is extremely important. One of the most trusted names offering wealth management products in India is IndiaNivesh. It specialises in offering customised solutions for their wealth management clients across income levels. Their client-first approach coupled with their rich experience and technological competence enables them to preserve and grow the client’s net worth. Their "Wealth Cafe" offers an exhaustive database of research ideas and reports for the client's information. More importantly, their presence across a wide range of financial solutions such as broking, institutional equities, strategic investments, insurance, and investment banking helps them gain a holistic view of the markets. This translates into profitable and sustainable investment advisory for clients looking for personal wealth management services in India.Final Words:We hope that this article has addressed a lot of questions. Such as what is wealth management, why you need it along with an overview of the offerings. And now that you know who can help you with managing and growing your corpus, make sure you make the best use of their expertise. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
What is NCD (Non Convertible Debentures) Investors are continually looking for new investment avenues, especially in a market where conventional investment instruments and sometimes falter in a volatile market. One such attractive proposition that can help you manage liquidity and risks while offering significant profits are nonconvertible debentures (NCDs).What is NCD?Nonconvertible debentures meaning, NCDs are financial vehicles issued by reputed companies for a specified period of time with a guarantee of a fixed interest to investors. Unlike standard debentures, nonconvertible debentures cannot be transformed into equities or company shares. The company that issues the NCD decides on the interest rates. On maturity, investors receive the principal amount and the interest together. Nonconvertible debentures can be held by individual investors, banking institutions, primary dealers, unincorporated establishments, registered corporate bodies and other bodies incorporated in India. Companies issuing upcoming non convertible debentures in the market, do so to raise funds from the public. These NCDs can be secured or unsecured. Secured nonconvertible debentures are supported by the issuing company's assets to accomplish the debt responsibility. Hence, if the company fails to pay its investors, they can claim the payment by liquidating the company's assets. On the other hand, unsecured NCDs are ones that are not supported by the company's assets. Thus they hold far higher risk than secured NCDs.Features of nonconvertible debentures:Interest rates Typically, the interest rate of NCDs overs between 10 to 12%. Fixed deposits on the other hands could offer a maximum of 8% returns. Hence, compared to most investment options, NCDs can be lucrative due to its high-interest rates. However, how credit rating agencies grade a company’s NCD can be inversely proportional to the interest, it provides. For instance, a highly rated NCD could provide low-interest rates. But compared to corporate fixed deposits, bank fixed deposits and government bonds that give a maximum of 8% returns; nonconvertible debentures offer returns up to 11%, which makes it an attractive investment instrument.Pay out options If you are looking to invest in nonconvertible debentures, you can benefit from a variety of interest pay out options such as on a monthly basis, quarterly, six-monthly or annual basis. Typically, NCDs could mature from 90 days to 20 years. Hence, you have the opportunity and flexibility of choosing short and long-term tenures depending on your investment objectives.Liquidity Non convertible debentures are listed on stock exchanges and offer secure withdrawal options. Redeeming your investment from NCDs can be easier than bank fixed deposits, and hence, can be considered as providing better liquidity than FDs.IssuanceA company that offers nonconvertible debentures through open issues can be purchased within a specified timeframe. Similarly, NCDs can also be purchased from the stock market. To understand what is ncd in stock market, you may want to look into the open stock market and exchanges for easily tradable NCD options.Stringent credit ratingNCDs are only authorised to be issued by companies that have good credit ratings. Credit rating agencies rate NCDs and revise ratings regularly.Things to consider before investing in non convertible debenturesIt is critical to understand how NCDs can be vulnerable to risks. These risks could be related to how a company's business is handled and how it utilises its funds. An NCD’s credit rating could take a hit if the company's turnover is impacted negatively. To address the impact, companies then borrow additional funds from banks and lending institutions. This is why it is critical to consider a few points before investing in nonconvertible debentures. These include:Issuer's credit ratingOpt for a company that has a credit rating of AA and above. The score is a crucial indicator of the company's potential to raise funds from external and internal operations. The rating is also evidence of the company’s sustainability. Credit rating is a valid parameter that can expose the financial position of the company.Debt levelsIt is essential that you conduct background checks on the asset quality of the organisation if you are considering to invest in its nonconvertible debentures. If a company is allocating more than 50% of its entire assets in unsecured loans, it can be a sign to stay away from such companies.Understanding CARCapital Adequacy Ratio or CAR looks into the company's capital and calculates if it has adequate funding to outlive potential losses. It can be an excellent idea to look into the company you plan on investing to see if it has at least 15% CAR. Alternately, you must also ensure that the company has historically maintained the CAR over a period of time.Looking to NPAsA company issuing NCDs must set aside at least 50% of their assets towards Non-Performing Assets or NPAs. This can be an optimistic indicator of the company's asset quality. In the event that the company's quality declines due to bad debts, you may want to take it as a warning.Gauging ICRA company's ability to settle the interest on any of its debts at any given time can be witnessed in its Interest Coverage Ratio or ICR. The ICR of a company reveals how it can handle potential non-payments.Tax bracketIf you belong in the 10% and 20% tax plan, you may find nonconvertible debentures as a lucrative investment option. This is because, if your tax bracket is low you stand to earn more from NCDs.ConclusionThere is a marked difference between fixed deposits and non convertible debentures. It can be an excellent idea to look into specific factors before selecting an NCD as an investment option. Consider the company's financial health and how it employs its funds if you notice a diversion from its core business; it can be a sign to stay away from the said company. Going through the credit rating of companies can also give you a fair idea of how your investment is secured. For instance, you may want to steer clear from companies that have low ratings but temptingly attractive, high returns. Such propositions could be risky in the long run, especially if the overall financial health of the company is not stable. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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