What does Share Market Investment Meaning?
In a share market, stocks/shares/securities are bought and sold. Securities are financial instruments that have a value associated with them.
The share market, also known as the stock market, is a regulatory back where all companies are listed. Investors can buy a share in a company of their choice. You can not only buy and sell shares, but you can also trade on various shares and assets in the stock market.
Why Is It Important to Invest in Stocks?
Potential to earn High Returns -
One of the reasons to invest in stocks is to take advantage of the high return potential in the long run. Stock investment helps an individual to make considerable profits.
Earn passive income -
Multiple companies pay a portion of their profits and pay a dividend to their investors. Hence, by investing in dividend-paying stocks, one creates a passive source of income.
Diversifying Portfolio -
By Investing in stocks, debt, and equity, you can build a diversified portfolio across various industries. It will also decrease your overall risk profile while improving returns simultaneously.
How to Invest in the Stock Market?
Learning how to invest in share market can be a rewarding way to build wealth over time. With the right steps, anyone can begin the journey and understand how to invest money in share market effectively.
Step 1: Begin by opening a DEMAT account and linking it to an existing bank account to facilitate transactions without issues.
Step 2: Access the DEMAT account using either a mobile application or a web platform.
Step 3: Choose the stock you are interested in purchasing.
Step 4: Ensure your bank account has adequate funds to cover the cost of the shares you plan to buy.
Step 5: Place an order to buy the stock at the current market price, specifying the number of shares you want.
Step 6: When a seller accepts the offer, your purchase order will go through. After the transaction, funds will be deducted from your bank account, and the shares will be credited to your DEMAT account.
By following these steps on how to invest in share market, beginners can navigate the basics of stock market trading. Understanding how to invest money in share market can also lead to financial growth and a diversified investment portfolio.
For years, stock market investments have proven to be rewarding and have only grown with time. Investing in the share market requires following a few simple steps.
Let's help you understand these steps in detail so that you are all set you kickstart your investment journey.
The key and initial steps are opening a Demat & Trading account.
- You need to choose a broking platform like Bajaj Broking and open a Demat & Trading account to start investing.
- You will also need a Bank Account linked to your Demat & Trading A/c to add and withdraw funds. The next step would be select shares that you to invest in. For trading, you need sufficient funds in your Demat account to buy shares.
- You select the price point you want to buy or sell a share. Wait for the seller/buyer to reciprocate that request.
- Once the transaction is complete, you either get shares or money for the stocks you bought or sold.
Investment Process
The process of investing requires only a few clicks through online platforms. You can invest from your phone, laptop, PC, etc. Investing means buying stocks and holding them for your desired time till you achieve your target.
An investor will select the stock of their choice and decide the stock quantity. Once ready, they will put a buy order on the exchange/market.
When you place an order with a broker, they will execute it on your behalf, the amount will be deducted from your Demat & Trading account.
The shares will reflect in your Demat A/c within two days of the transaction.
Investing in the Primary Market through IPOs
Investing in the primary market or IPO is when you invest in a company or its share before they list in exchanges. A company goes public when it requires to raise money for business expansion. An IPO provides a unique opportunity for retail investors to buy shares at a discounted price.
You need a Demat & Trading account with a stockbroker to apply for any IPO. Once the IPO date is announced, you can apply through your Demat & Trading.
The amount required for any IPO is between Rs. 14000 to Rs. 15000. IPO allotment happens through a lottery system. In the case of share allotment, they get electronically delivered to their Demat accounts.
Investors can sell the shares once they list in the share market to earn probable profit in the IPO. They can also hold on to their investment for as long as they want.
Investing in the Secondary Market
The secondary market is nothing but the stock market. Once the shares are listed on the stock exchange, investors can buy and sell those stocks or in other words trade on those stocks. Investing in the secondary market is analyzing the stock that you want to purchase. While analyzing you need to keep a check on past performances, growth potential in the future, and company financials among several other factors. This type of analysis is popularly known as Fundamental Analysis. Investors buy potential stocks and hold on to their investments till their desired target is achieved. The secondary market not only offers simple buying and selling of stocks it also offers other options like intraday trading, derivatives trading, etc.
The only thing you require to invest in both primary and secondary markets is a Demat & Trading A/c, and you can start investing in a few minutes.
Things To Keep in Mind While Investing in the Stocks
There are several factors that you should consider before you start investing. Investing is putting your hard-earned money into an asset, and it will always be wise to do your due diligence before you invest. Let us understand a few factors that you should consider before you invest.
- Portfolio Diversification- Keeping your portfolio diversified is a healthy thing to do. If your portfolio is dominated by a particular asset class, you continue to have a steady flow of funds even when the instrument goes through a rough patch. To offset the low phase of one asset class, financial advisors suggest adding alternative asset classes.
- Understanding the type of your investor profile – Your profile can reveal the kind of instruments that will suit your risk appetite. By doing this, you know whether the amount of risk you take will suit your lifestyle or not.
- Make an investment plan – You could avoid the potential risk in the future if you have chalked out an investment plan. The same should include the returns you want to earn from your investments. Have a deadline set and invest consistently for that period.
Conclusion
Investing has the power to bring in a better financial future. With a little effort and consistent investments, you can achieve your desired target. Investing is an empowerment tool that almost anyone can use to elevate the standard of their financial status.