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Share Market - How to invest in share market

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.