Investing in the stock market can be difficult, especially for a beginner. If you want to invest in stocks, you should keep in mind that there are two types of stock markets: primary and secondary stock markets.
Investing in primary stock market.
Investment in the primary stock market occurs through initial public offerings (IPOs). After a company receives all the applications made by investors for an IPO, the applications are counted and shares are allotted based on demand and availability. To invest in both primary and secondary markets, you must have a demat account which will hold electronic copies of your shares. Additionally, a trading account is also important which will help in buying and selling shares online.
In rare cases, it is also possible for a merchant to apply directly from their bank account. IPO application through net banking has been made easier through a process known as Application Supported by Blocked Amount (ASBA).
As per ASBA procedure, if someone applies for shares worth ₹1 lakh, these funds will be blocked in their bank account instead of being sent to the company. Once you receive the allotment of shares, the exact amount will be debited as the balance is released. All applications sent to the IPO are required to follow this protocol. Once shares are allotted to traders, they are listed on the stock exchange, and you can start trading them within a week.
investing in secondary stock market
Investing or trading in the secondary stock market refers to the regular buying and selling of shares or stocks. There are some simple steps you need to follow before you start investing in the secondary stock market.
Step 1: Open a Demat and Trading Account.
This is the starting point for investing in the secondary market. Both these accounts should be linked to an already existing bank account for seamless transactions.
Step 2: Selection of shares.
Log in to your trading account and select the shares you want to sell or buy. Make sure you have the necessary funds in your account to purchase those shares.
Step 3: Choose a price point
Decide the price at which you want to buy or sell a share. Wait for the buyer or seller to respond to that request.
Step 4: Complete the transaction
Once the transaction is completed, you receive either shares or money for the shares you bought or sold respectively.
Make sure you are conscious of the period for which you remain invested and what financial goals you want to achieve through your investments.
Documents Required to Open Demat/Trading Account
To start investing in the stock market, you must have the following documents:
PAN card
Aadhar card
Show name, IFSC code, account number, account holder name and signature on canceled checks from their active bank account.
Documents showing that the applicant earns a stable income.
A proof of address which is based on the list of documents accepted by your broker, depository participant or bank
Passport size photographs of the applicant.
Things to keep in mind before investing
Although stock trading is not as difficult as it seems, it is possible to get swept up in the world of trading without reaping the rewards in the long term. To prevent this outcome, keep the following points in mind before investing:
Diversify your portfolio.
A diversified portfolio is a healthy portfolio. If a particular asset class dominates your portfolio, it will not offer a steady stream of money to you when that instrument is going through a bad phase. To compensate for the short duration of one asset class, financial advisors recommend adding alternative asset classes. For example, equity is often offset by investments in bonds or other debt instruments. This balance in the portfolio can protect one from market crises.
Understand your investor profile
Your investor profile can reveal the type of instruments that best suit your risk appetite. This allows you to ensure that you are taking the risk that best suits your lifestyle.
Create an investment plan
If you have an investment plan that outlines how much revenue you want to earn from your investments and how long you potentially need to stay invested to earn that amount, you can avoid potential losses. Can.
conclusion
When it comes to investing in the stock market with the IIFL Share Market App, there are some key points to keep in mind. These include planning your investments, understanding your risk appetite and ensuring that you diversify your portfolio. If you are having difficulty selecting the right stocks or planning your investments and setting targets as per your acceptable level of risk, reach out to our expert traders at IIFL and avail our stock recommendation services now!