Buying shares is not only exciting, it can give you a lot of money. If you are willing to bear high risk, then shares give you good returns. In this article you will learn how to buy shares, and enter the exciting World of trading (buying/selling) shares.
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For any financial transactions, you need a PAN. A PAN is a unique 10-digit alphanumeric number, which is allotted to you by the income tax department. You require a PAN to invest in an FD, Mutual Funds, RD, PPF and yes, shares.
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You cannot buy and sell shares directly on a stock exchange. There are some people who are authorized to buy and sell shares on the stock exchange. They are called brokers.Brokers can be individuals, Companies or even online agencies, who are registered and licensed by SEBI.
You have a broker, but you need a demat and trading account to buy and sell shares. A demat account holds your shares in an electronic format. If you want to buy and sell shares, you need a trading account. NSDL and CDSL are the depositories which provide demat and trading accounts in India, through brokerage firms.
A depository is a link between Companies listed on the Stock Exchange and you and other shareholders. It helps you buy shares in a paper-less manner. NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are the 2 depositories in India.
A depository issues shares through associated agents called depository participants (DPs). A DP could be a bank, financial institution or a broker, which is responsible for the final transfer of shares.
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You must inform your broker on the Company whose shares you want to buy, the quantity and the price of purchase. When the shares reach that price, the broker purchases them on your behalf. The buy order remains valid only till a certain time. If your buy price is not reached within that time, the order is cancelled and you have to place a new order.
All the shares you own are held through 2 depositories, NSDL and CDSL. Let's say Company X wants to give dividends. It will get the list of shareholders from NSDL and CDSL. If you have bought the shares of Company X, then dividends will be credited directly to your bank account. Be Wise, Get Rich.
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