People find it quite difficult to invest in shares as most of us are unaware of the proceedings. They prefer more to invest in gold or silver, without being aware that shares are a better option. For those who want to actually take a step forward in the share market, for them, here is how to get started with share market investment in India.
Below is a guide in 6 steps to help you out to invest in share market-
1. Have a PAN card
PAN or Permanent Account Number is the most primary requirement for entering into any financial transactions in India. Well, for your knowledge, it is a unique 10 digit Alpha-Numeric number that is assigned to an individual by the Tax Authorities for assessing their tax liabilities. PAN is however required not just for opening a bank account or investing in mutual funds, and filling Income Tax returns but also for other transactions. Also, the first thing you would need to invest in shares in India is a PAN card.
2. Find a Broker
Strange but true that you and I can’t directly go to the stock exchange and buy or sell any kind of stocks/shares like we usually buy or sell any other commodity. Only brokers are allowed to buy and sell shares in the share market. Brokers can usually be individuals or even companies and online agencies that are registered and licensed by SEBI or Securities and Exchanges Board of India, which regulates the share market. So, just get a broker. They can either be individuals you know are reliable, or you can also approach various companies that are licensed to trade and deal in securities in the markets.
If you are well comfortable with the internet and online stuff, then you can even have online broking through companies like Sharekhan, ICICI Direct, Indiabulls, Kotak Securities etc.
3. Now Get a Demat and a Trading Account
Once you have got a broker, whether, in the form of a person, online or any famous company, you would now need a Demat and a Trading account. A demat account would basically hold the stocks or shares in your name and the same would reflect in your stock portfolio.
You can’t hold shares in a physical form. They have to be in Dematerialized state or Demat state. A Demat account does that for you as a shareholder. It stores the shares you buy from the markets through any of your brokers in your account in your name. The selling would also be from here and it would reflect in your Demat statements that you would receive from time to time. You would never have a physical share certificate in your hands; it would always be reflected in your Demat Account Statement.
For the trading of shares, you would, however, require a Trading account. A trading account would be an intermediary which facilitates the buying and selling. Usually, your broker would take care of all this. Whether you approach any individual broker, any broking firm or even online agencies, the Demat and Trading accounts would be opened simultaneously as one without the other is absolutely useless for investing in shares in India.
4. Know the Depository Participant
There is even a Depository Participant that you would need to be aware of. There are basically two depositories in India: NSDL and CDSL which stand for National Securities Depository Limited and Central Depository Services Limited. These two depositories have their own agents in the form of Depository Participants who would provide an account to you to store the shares you hold. It isn’t the same as the Demat and Trading account as in the Demat it would show the number of shares you hold and the Trading would reflect the buying and selling that has taken place in your account. Depository Participants would hold those shares that you bought and then release the shares you sold. However, all the above processes are taken care of by your broker, so you need not worry.
5. Get UIN if you want to invest BIG in share market
UIN or Unique Identification Number is basically required in the case you trade for Rs. 1,00,000 or even more at a single time. If you do plan to go BIG in the share market, then UIN is definitely needed. Otherwise, for regular investors, it isn’t required.
6. Buying and Selling
For buying or selling of the shares, you need to first inform your broker about which share you wish to buy in which quantity and at which price. For example, if you ever wish to buy 10 shares of Reliance Industries Ltd when it reaches a price of Rs. 685, you have to inform the same to your broker. In case you are using online broker, they usually have customer care numbers where you could place your order if you don’t have access to the internet at that point of time. When the share would reach that price, the transaction would be made on your behalf. Well, same would be done in the case of selling.
I hope that the list of above steps would help the beginners when they step into the share markets.
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