India is home to a large number of young people who tend to invest largely in share markets. But the true fact is that majority of them do not know where and how to begin from while investing their money in equity share. This article will offer a guide to the beginners who wish to invest their money in shares and stocks in India.
What are stocks and shares?
Shares generally represent a part of the ownership or what we call as fractional ownership. Any businessman issues these shares in order to expand his business. Shares offer him the opportunity to distribute the ownership among various stakeholders. These shares are then listed on the stock exchange where they are traded.
How can you buy shares in India?
If you are a beginner and wish to invest your money in the stock market, then initially you will have to contact a broker associated with the share market. This broker can be companies or individuals who are members of the stock exchange. These agents or brokers will help you fill in the required forms and complete all the formalities needed to start trading of shares. They will also help you in opening two types of accounts – trading account and demat account.
Difference between trading account and demat account
A trading account is opened for the purpose of buying and selling the shares and a demat account is opened to hold the shares.
A demat account is just like any other electronic account which holds your shares. Like a bank account when you buy or sell shares, they are credited or debited to your demat account respectively. It works in the following manner. When you buy shares, your bank account is debited and demat account credited. On the other hand, when you sell shares, your demat account is debited and the bank account linked to it is credited with the money.
What benefits do you get when you trade shares?
When you put your money in banks, you just earn interest as per the prevailing interest rates. But investing your money in shares offers you much more. You earn dividends, bonus and also the rights as a shareholder. A part of these benefits, the most important one is that the value of shares keeps on appreciating with time and thus they serve to be an asset to you.
How do shares rise and fall?
Share prices are dependent on the factors of demand and supply. If there is high demand for a particular share, its prices will go up and rise sharply. On the other hand, if the pressure to sell a company’s shares is too much, its prices will go down.
When to buy shares?
No investor or broker has a sure shot answer to this question. This is because there is no guarantee when it comes to shares. Share trading is risky and nobody ever has just made profits in shares. You should be prepared for losses too. If you are a beginner it is suggested that you take guidance from a broker. Their suggestions are based on research and thus can be a better way to invest in shares.
Apart from the above-mentioned information, you should also know the basics about the Nifty and SENSEX. Also, you should be aware of the taxation policies that apply to share trading. Generally, shares are quite an effective tax-saving instruments and therefore more and more people invest in shares these days.
For more information on share trading and related articles, you should read more of financial blogs and magazines online.