Before we start learning about how to invest in stocks lets talk about what is a stock market?
What is Stock Market?
A stock market is a meeting place where traders/investors buy and sell the shares.
What is the difference between Stock & Share?
Stock: “Stock” is the general term used to describe the ownership certificates of any company.
Share: “Share” is the general term used to describe the ownership certificates of a particular company.
So, if any investor says they own stocks, they are generally referring to their overall ownership in one or more companies. And if someone says that they own shares it means they are referring to ownership for the particular company.
Now you got to know the difference between stock and share. Now the next question comes to your mind is how to invest in stocks?
How to invest in Stocks?
To invest in the stock market we need a marketplace to buy and sell shares. In India, two major stock market/exchange will allow you to buy/sell shares. One is NSE (National Stock Exchange) and the other one is BSE (Bombay Stock Exchange).
Can I go and buy shares at the stock market?
You cannot go directly to stock market/exchange to buy/sell shares. Stock market/exchange allows only authorized people to buy/sell in the market. They are called Brokers.
Who are Brokers?
Brokers can be individuals or companies and even online agencies that are registered and licensed by SEBI or Securities and Exchanges Board of India, who regulates the stock markets. Through Brokers, you can buy /sell shares.
How to find a Broker?
Here are the top 5 Brokers in India from where you can buy/sell shares.
Select any broker to buy/sell shares. And don’t forget to check the brokerage charges. Each broker will charge you some amount for buying/selling the shares. Always go for low brokerage. Then only you can earn decent profits else you end up paying more brokerage than the profit you earned.
My personal choice would be Zerodha. I have been trading with Zerodha for a long time. They have a flat discount brokerage.
Once you choose your broker now it’s time to get a Demat account. Your broker will provide you Demat account and trading account. You might be confused what is the difference between both of them (Demat & Trading)?
Trading account: A Trading account is a platform it could be web or mobile or desktop app where users can buy shares as well as sell shares.
Demat account: Once you buy shares it store the shares in your Demat account with your name. You cannot hold shares in physical form or store them physically. They have to be in Dematerialized state or Demat state. That’s why we need a Demat account.
The broker will provide you both Demat & Trading account. Once you got your account opened its time to start trading.
First, ask yourself a question whether you are interested in investing or trading? What’s the difference between them?
In trading, you buy the shares and sell them immediately when the share price moves high. Whereas in investing you hold the shares for a longer period and then you sell them for higher returns.
Once you decided to invest/trade now start with a small amount. Don’t invest huge amount at the beginning itself. First, understand how it works. Then gradually increase the amount.
There are two types of trading. One is Intraday Trading and the other is Delivery trading. In Intraday trading you will buy the shares and sell the shares on the same day. Whereas in Delivery trading you buy shares and sell them anytime you want.
For absolute beginners, I recommend Delivery trading. As it will help you understand how to do trading in stock market. Hope now you got to know how to invest in stocks.
In my next posts, I will explain about which best stocks to buy? Tricks to earn money in stock market.
Any more queries please write below in comments. Happy to help you.