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How To Invest In Stock Market? Research Team | Posted On Thursday, January 03,2019, 04:47 PM

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How To Invest In Stock Market?



What is stock market?

The stock market consists of buyers and sellers who trade in shares and derivatives (Options and Futures) over the stock exchanges like BSE and NSE. Shares are basically fractional ownership in a company. The stock market is regulated by the capital market regulator, SEBI or Securities and Exchange Board of India. SEBI looks after the functioning of the stock market and ensures fair trade practices. Price manipulations and Insider trading brings strict action from SEBI.

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How To Invest In Stock Market?

Types of stocks to invest

  • Common Stock: these are the stocks that allow the investors gain a sizeable amount as share prices rise and also get dividend payments. It is a kind of equity ownership that allows the holders of this stock get voting rights on corporate matters. However in case the company suffers heavy losses and ends up bankrupt, the holders of the common stock are the last ones to get their money back after regular creditors, bondholders, and holders of preferred stock.
  • Preferred stocks: Preferred stock also represents owning a share of the company. Preferred stock pays a predetermined dividend, whereas the dividends paid to common shareholders tend to vary according to the company's fortunes. Dividends on preferred stock are often higher than common stock. Holders of preferred stock do not get to vote on company matters. On company's assets being liquidated, the preference shareholders get to redeem their shares before the holders of the common stocks, increasing chances of getting at least a part of their money back.

SEE ALSO: Simple Tips To Invest In The Stock Market

How to invest in stock market:

Stocks can multiply money and give higher returns due to the compounding benefit.  There are few important things that a person should keep in mind before investing in shares.  You must follow some procedures to get started with the trading. Open a demat and trading account. Link both the demat and trading accounts with your savings bank account called 3-in-1 account to facilitate smooth transactions. The process is very easy and is completely online.

Get a Broker: The broker helps buy and sell shares. If you want to trade in shares, better find a broker. The trade is carried out through the broker as he facilitates trading between both the parties. To trade in stocks it is important to open a DEMAT account with a SEBI registered broker.

SEE ALSO: Types of Order in Stock Market

Get a Demat Trading Account: a DEMAT account enables the storage of shares, electronically. For trading in shares you must open a trading account along with DEMAT account. After buying the shares, they get automatically transferred to your DEMAT account.

To open a DEMAT account; you must first select a depository participant like a bank. Fill up the account opening form and attach the documents required which are – proof of identity, proof of address, PAN card and passport sized photographs.

Read in detail the copy of the rules and regulations and terms of agreement. You will then be informed on the charges that would be incurred. Verification will be carried out during the process where an executive from the depository participant contacts you and checks the details provided in the account opening form. Once the application is processed, the DP will provide you with an account number or client ID. You can use the details to access your DEMAT account online.

SEE ALSO: Lost Money in the Stock Markets?

Tips to invest in stock market:

  • Have clearly defined investment goals
  • Choose stocks/equity mutual funds based on your investment goals
  • Start investing from a young age and do it regularly
  • Based on your risk appetite, diversify your investment
  • Do complete research on the company you plan to invest
  • It’s not wise to believe in rumours
  • You should have patience and not be too greedy
  • Take expert help before taking an investment decision

Investing in stock market yields higher returns and helps your investments grow in no time. You can either opt for short term or long term investments as per your needs and investment goals.

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