Before any investment decision you make, it is necessary that you gain adequate knowledge about the instrument. Investing in stocks or shares is no different. You need to have knowledge of the basic operating of the share market, the reward prospect, the risk and last but not the least you need to identify your risk appetite which will guide your future actions on this market.
Once you have gone through the above and finally are ready to invest or trade in shares, you need to do the following:
1. Identify a good broker you want to work with. (You cannot directly buy or sell shares on a stock exchange, you need a broker for the same.There are so many brokers operating in the market. To chose one suitable to you, take help of your financial advisor and friends who are trading in this market. Check the internet for confirmation)
2. Open Demat and trading accounts with a depository through the broker – to open a demat and a trading account in India you need a PAN card, an address proof, an active bank account (preferably with online banking facility)
3. Once above accounts are created transfer the amount you want to invest, to the broker’s account from your registered bank account.
4. Now, you can start buying / selling shares either by giving instructions to your broker or by yourself through mobile / web portal provided to you by your broker.
5. Keep track of your investments.
Terms to know
A Stock Exchange is a platform where stock, derivatives and other financial instruments are traded (bought and sold). Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Both exchanges follow the same trading mechanism, trading hours, settlement process, etc. Almost all the significant firms of India are listed on both the exchanges.
A Demat account (short for Dematerialized account) is an account to hold your shares or other financial securities (equity or debt) in electronic form. In India Demat accounts are maintained by two depository organisations, NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).
A Depository is a link between the companies listed in the stock exchange and you. It helps you buy shares in a paperless manner (by maintaining demat accounts). They issue shares through a depository participant (DP) (banks / financial institutions / brokers) which is responsible for the final transfer of shares.