The idea of investing in stocks and building a fortune over time is nothing short of captivating, propelling many to open a download an online stock trading app and start investing in stocks. However, for beginners who have just stepped into the markets, the sheer magnitude of information to grasp can be daunting.
But fear not, for we have compiled a beginner’s guide to provide an introductory overview of the fundamental concepts of the stock market, as well as a glimpse into how you can begin your share market investment journey. So, let’s delve into the realm of stocks and shares, shall we?
What is The Stock Market?
Picture the stock market as a bustling bazaar filled with buyers and sellers engaged in the trade of publicly traded companies. Investors and traders alike partake in this dynamic marketplace by buying or selling shares of listed companies they feel and appreciate in value overtime—so that they can earn profits. Shares denote a slice of ownership in the company, and purchasing them translates to claiming a stake in the business and its profits.
The stock market could be segmented into two types—the primary market and the secondary market. To go public, a company must first issue shares to the public via the primary market, typically through an initial public offering (IPO). Once the IPO is launched and the company goes public, its shares are listed on stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), and the trader can start trading the shares of that company. The popular names like HDFC Bank, Infosys, ITC, etc, all trade in the secondary market.
What Do You Need To Invest In The Stock Market?
Investing in the stock market has never been easier in today’s digital age. To kickstart your investment journey, you will need two accounts—a demat account and a trading account. Once you have successfully opened these accounts, you can invest in the stock market from anywhere, using your smartphone, tablet, or laptop.
Simply log into the trading platform or app and begin by searching for the company you want to invest in or trade. After you have found the desired company, choose the type of order, and enter the price and quantity details to place your bid. Following this, your stocks will get credited or debited from your demat account in two trading days, as long as its a delivery order. (Now the regulators may have reduced it to one depending on when you’re reading this article.)
How To Obtain A Demat Account & Trading Account?
A demat account plays a crucial role in investing online, serving as an electronic repository for shares. In India, demat account services are offered by two depositories:
- NSDL (National Securities Depository Limited)
- CDSL (Central Depository Services Limited).
To open a demat account, you will need to approach a DP (depository participant), who is a member of at least one of the aforementioned depositories. The DP makes demat account services and trading accounts available to the public and may even provide other trading facilities. Additionally, the DP typically provides the trading app or platform that you will use to trade. Thus, it is essential to conduct thorough research to find the best app to trade in India.
To open a demat account and trading account, visit the DP’s website, where you can fill out an application form and submit online copies of supporting documents. After verifying your credentials, your DP will provide your trading account details, allowing you to begin your investing journey.
How To Invest In Good Stocks?
Now that you have a basic understanding of the stock market and how to start investing, let’s address a most sought-after question: how do you invest in the best stocks? But before that, let’s first understand the factors that influence stock prices.
The core drivers of stock prices are supply and demand.
- In the long term, it’s the company’s earnings and cash flows that ultimately determine its stock’s demand and supply. The earnings growth depends on factors such as such as the company’s competitive position, management quality, industry trends, and macroeconomic factors.
- However, short-term events such as news and rumours can also impact a stock’s supply and demand momentarily.
As a long-term investor, you need to analyse which companies have the potential to consistently grow their earnings by scaling up their operations. To do this, you need a solid understanding of business fundamentals and the ability to analyse key parameters that impact a company’s financial performance. Therefore, if you aspire to be a successful investor, it is essential to learn the art of fundamental analysis.
- Investors and traders partake in share market investing to grow their wealth over time.
- The stock market is dynamic marketplace where buyers and sellers buy and sell shares of publicly listed companies
- You require a demat and trading account to invest in the stock market.
- You can open these accounts and obtain your online stock trading app by approaching a DP.
- Analyse stocks thoroughly using techniques of fundamental analysis before making investment-related decisions.