Banks offer a lot of services to their customers. But in order to enjoy all these services, you need to first open a savings account. Similarly, if you wish to invest in the stock market, you need to open a trading and demat account.
You can think of your demat account as a savings account for your shares. All the shares that you buy are stored here. And when you wish to sell them, they are taken from here to be sold in the market.
In this article, let’s find out the different steps in order to open a demat account and how you can trade using it.
Steps to open a demat account:
Step 1: Choose a Depository Participant
Depository Participants or DPs are intermediaries between investors and the depository. Brokers, banks and other online investment platforms serve as DPs in the country. Select a valid DP in order to create your demat account. You can find the entire list of DPs on the official websites of the Central Depository Services (India) Ltd (CDSL) and National Securities Depositories Ltd (NSDL).
Step 2: Submit account opening form
Fill out all the details in the account opening form provided to you by the DP. In addition to the account opening form, you will also be required to submit your KYC documents. This includes:
a) Know Your Customer (KYC) form
b) Passport size photographs
c) Identity proof documents
d) Address proof documents
Step 3: Assign nominee
Once you submit all the necessary documents, you will be required to assign a nominee. This is to ensure that the responsibility of your investments would be assigned to somebody you want in case something happens to you. You also have the option of changing your nominee at a later stage if you wish.
Step 4: Verification
You may also have to appear for an in-person verification. The DP carries out this process to ensure that the details provided in your documents are correct.
Buying and selling shares through demat account
Once you open a demat account, you can start trading.
The process is as follows:
Select a stock you wish to purchase. Specify the price and quantity.
For example: Buy stock X at Rs 50. Quantity: 100 shares
You can inform your broker to make the transaction or you can do it yourself online. When the stock reaches the price of Rs 50, the transaction is executed.
100 shares of Stock X will be reflected in your demat account. When you wish to sell them, you can make a sale order by stating the price and quantity of shares.
The DP sends you statements of your transactions on a regular basis. Go through these statements to be updated on your investments.
Demat account is easy to use and very beneficial. You can trade many securities apart from stocks. It also provides statistical analysis and performance tracking features. Above all, it is a safe way to invest.
Disclaimer: "Investment in securities market are subject to market risks, read all the related documents carefully before investing."
When it comes to the stock market, nobody is perfect. Anyone can make mistakes. But that doesn’t mean you make the same mistakes as the others did before you. Wouldn’t it be great if you got a cheat-sheet that helps you avoid some of the common mistakes?Well, this is a cheat-sheet that can give you a leg-up over the others.1) Lack of knowledgeMany investors commit mistakes in the stock market simply because they do not have the required know-how. They directly start trading or investing without any prior knowledge. It is important to be aware of some of the fundamentals in the market before putting your money in stocks. Comparing and contrasting different stocks in a sector, reading the financials of a stock and identifying patterns are some of the important aspects on which you should have a firm grasp. 2) Investing without a planAs an investor, there may be many things you want to achieve.a) Building a home for your family b) Sending your children to the best schools and collegesc) Taking your family on an exotic vacation d) Earning a regular incomeYou may invest your money in order to achieve these different goals. But what if two goals clashed? You may not be able to do justice to both goals at the same time. This happens when you invest without a plan.In order to achieve all your goals successfully, you need to create a proper financial plan. This way, you can allocate funds to meet specific goals. For example, you can invest in stocks of blue chip companies in order to earn a dividend. This gives you a regular income. You can use another portion to invest in equity mutual funds in order to buy your house in 10 years time. This way, you can achieve your goals one after the other.3) Timing the marketMarket timing is a strategy where investors buy or sell in the market by trying to predict future price movements of stocks. This can be quite risky, especially if you are new to investing. The market timing strategy uses historic price movements to identify future prices. 4) Investing on unsolicited tipsThe stock market is filled with people giving tips. Even on TV, newspapers and online, you come across several self-anointed market gurus. You might read headlines such as: “Invest in these 5 stocks to double your money in 6 months.” Such headlines are sure to lure a reader to take a look. But if you act on these tips, it may be the fastest way to part with your hard-earned money. Beware of such tips. Don’t invest based on these suggestions without doing your own personal analysis. After your research, if it still sounds like a good idea, you can invest in the stock. 5) Ignoring portfolio reviewBuying stocks is not the final investment step. You need to monitor your portfolio and review it on a regular basis. Many people ignore this step. If the funds in your portfolio don’t work as per your expectations you should change them. In addition, your goals may change as you grow older. For example, after you become a parent, you may have to incorporate your child’s needs into the financial plan. It is important to incorporate these goals in a timely manner. ConclusionThere could be any number of mistakes an investor makes in the market. But by avoiding some of the basic ones, you can gain investment experience a lot faster. Avoid the above mistakes to ensure better performance in the stock market. Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
“What next?”It is probably the most popular question that you get asked by family members when you go home for holidays. You may have completed your education and have just bagged a well-paying job but your family may always ask: “What next?”Well, the right answer to this would revolve around investment. Not saving, but investment. That’s because investing can help your money grow faster. So, if you want your money to work hard for you, here is a step-by-step guide to help you chart your investment journey:Step 1: Educate yourselfIf you are new to the world of investments, don’t worry. It is not a big deal. The best thing about investing is that literally anyone can do it. Did you know that the famous investment guru Warren Buffett bought his first share at the age of 11!But in order to get started, you may need to educate yourself before investing. There are a lot of different investment avenues such as bonds, stocks, mutual funds, Unit Linked Insurance Plans (ULIPs) and so on. Each of these investment avenues have their own pros and cons. The risks and returns vary. Try to read as much as you can so that you can get a better understanding about these avenues.Step 2: Find out how much you can investEveryone operates on a budget. And whatever remains after the expenditure is labelled as savings. The general formula for most people is: Income – Expenses = Savings However, the ideal formula should be:Income – Savings = ExpensesHow much money you save shouldn’t depend on your expenses. Instead, how much you spend each month should depend on your savings. This small change can help you increase your savings. With more savings in your account, you can invest more. This can help you increase your financial returns later on. So, sit down and draw up your list of financial goals. And based on that, you can figure out how much you need to invest each month in order to reach these goals comfortably.Step 3: Find an investment advisorWhen you invest in the stock market, picking the right stock at the right time can be very crucial. That requires a lot of time and expertise. However, most people who invest in stocks, bonds and other avenues have regular jobs. It may not be possible for them to spend a lot of time researching markets on a daily basis. That’s why an investment advisor can be very helpful. An investment advisor can help you identify the right investment choices based on your short term and long term goals.Step 4: Understand your tolerance for riskWhen it comes to investments, there is always a degree of risk. Whether it is a savings bank account or the stock market, you cannot avoid risk. However, the degree of risk varies from one investment option to another. It is commonly said: higher the returns, higher the risk.It is important for you to know how much risk you are willing to take. This is because each investor has a different risk appetite. For example, if you have a low tolerance for risk, it would be unwise to invest in certain avenues like shares. But remember that if you put your money only in a savings account to play it safe, you can risk losing out on higher returns in the long run. Step 5: Create an investment portfolioFinally, you can start investing. Based on your investment goals and your risk levels, you can chart out an investment plan with your advisor. You can put your money in options like bonds, Public Provident Fund (PPF), National Saving Certificates (NSC), mutual funds, gold or shares. The important thing is to ensure that your portfolio is well-balanced. For example, you may want to invest in equities. But don’t forget to invest a portion of the money in debt options. This is because, if the stock market crashes, your entire investment doesn’t go down at the same time. The debt investments can give you good support at such times.ConclusionInvesting is not a destination. It is a lifelong journey. Follow the above steps and you can kick-start your investment journey on the right foot. Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
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