Guide on How to Invest in Stock Market
A share market is a place where shares are issued and traded in, has become a popular means of investing. With the advent of the digital age, almost everyone can participate in the share market and work towards fetching returns. While the share market can be a lucrative investment mode, it is only so if you understand investment practices. Here is a guide on investing in the stock market for beginners to help you with the same.
What is the Share Market?
As mentioned above, a share market is where companies can issue shares, and individuals can trade them. On the other hand, the stock market allows trading shares and mutual funds, bonds, derivatives, and other financial instruments. So, if you are looking to trade only in shares issued by companies, you are investing in the share market. However, if you want to trade using other securities, as well, then you can do so on the stock market.
An essential element of the share market is the stock exchange. The stock exchange is a platform that allows for trading company stocks and other instruments. Essentially, stock or security can only be traded if it features on the stock exchange list. The exchange acts as a place that catalogues all the securities that can be traded and facilitate the meeting of stock buyers and sellers. The two primary exchanges where you can trade in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
What are the Types of Share Markets?
The two types of share markets you can trade are the Primary Share Market and the Secondary Share Market.
- Primary Share Market:
When a company wants to get registered to issue their shares and raise money, they rely on it. One can use this platform to park a place for stocks on the stock exchange list. A company mainly enters the Primary Share Market to raise capital by offering its shares to the public through an Initial Public Offering (IPO).
- Secondary Share Market:
Once companies purchase new securities from the Primary Market, they can trade them in the secondary market. These trades offer investors a chance to sell the purchased shares. The transactions in the Secondary Share Market are between investors, wherein one sells and the other buys at the prevailing market price or one decided by the parties. Usually, trades on the Secondary Share Market come with intermediaries like brokers. HDFC Securities offers top-quality brokering services to help you trade quickly and efficiently. Click here to find out more about HDFC Securities.
How to Invest in the Share Market?
- Investing in Primary Share Markets:
If you want to invest in both the primary and secondary share market, you need a Demat Account. A DEMAT Account will carry the electronic copies of the shares you trade with. Along with a DEMAT Account, you also require a Trading Account, which allows you to buy and sell shares in the market.
If you invest in a company’s IPO, you will be allotted a select number of shares based on the market response. Once the company receives all the applications for investing in the IPO, they check the demand and availability of shares. Based on the availability of shares, the allocation to the traders takes place. You can easily apply to invest in an IPO through a net-banking process called Application Supported by Blocked Amount (ASBA).
Through this process, if you offer to buy shares worth Rs. 2 lakhs, the amount is spent towards the IPO. When the company in question allots their shares, the exact amount required for the shares allocated to you is debited to the company. The balance, however, is credited to your account. Once the shares are allotted, they are listed on the stock exchange, and you can initiate trading with them in the share market within a week.
- Investing in Secondary Share Markets:
Similar to investing in Primary Share Markets, you also need a DEMAT and Trading Account for the Secondary Share Market. Both accounts should be tethered to a Bank Account to allow for seamless transactions.
The next step is to log into your Trading Account and choose the shares you wish to sell or buy. Make sure that you have the funds required to carry out such transactions if you are purchasing shares. Also, check that you have selected the correct number of shares while selling the same.
Following this step, you must decide the price to buy the shares and the selling price. The buyer or seller will then reciprocate your request. You can then complete your transaction by transferring the money/shares and receive the requisite shares/money in exchange.
Open a DEMAT and Trading Account at HDFC Securities
At HDFC Securities, we provide top-of-the-line facilities to allow you to engage in the share market. Our DEMAT and Trading Account will enable you to avail of our excellent margin trading facility and practice currency and commodity trading, as well. You can rely on our robust research and guidance and use our quick and efficient transfer mechanisms.
We provide 24x7 assistance and relationship manager services to help you navigate the share market. HDFC Securities offers end-to-end investment solutions that can help you fulfil your financial aspirations.
Click here to open a Demat Account from HDFC Bank now!
*Terms and conditions apply. This is an information communication from HDFC bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.