How to Invest in Stock Market?

2021-09-13

How to Invest in Stock Market?

One of the most innovative ways to invest one's hard-earned money is by putting it in the stock market. People can acquire hefty financial returns that surpass investments through calculated stock market strategies.

Initially, it may appear intimidating to make any stock market move due to having limited knowledge of the subject matter. However, with detailed research, one's understanding of the stock market will get better, which will be seen in future investments.

A step-by-step discussion should clear maximum doubts and queries to provide a better insight into the functioning of the stock market.

Stock Market: What is it?

Like any other marketplace, a stock market trades in stocks, shares, commodities, bonds, and much more. In a stock market, publicly held companies sell their shares to investors, providing them with a small percentage of ownership.

India has two primary stock markets. They are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The NSE controls the majority of cash trades, covering almost 90% of the total trade exchanges. While these two are the most trustable platforms, there are other impressive options as well.

The investment process

  • The first and foremost step in the stock market investment process is to create an account on a brokerage platform.
  • Once the trading account forms, the platform creates a Demat account that holds your financial securities for you. It is important to remember that these two accounts connect to your bank account.
  • Since the bank account adds to the process, KYC verification is essential before opening a trading and a Demat account.
  • Once done, you can efficiently perform your stock market transactions using the internet.

Payments made in a stock market investment

  1. Transaction charges: Since brokers are the ones that guide you into making better investments, they also charge additional costs apart from their brokerage. These costs include taxes and other government dues. Securities Transaction Tax (STT), GST, SEBI charges all come under the Transaction Costs.
  2. Demat Charges: To maintain one's Demat account, one has to pay an annual fee usually collected by the brokerage platform.
  3. Taxes: One has to pay taxes to the government on the profits earned through stock market investments. The longer one holds stock in the market, the lesser percentage of tax they pay.

Investment Options

There are multiple options through which one can invest in the stock market. These include equity shares, bonds, mutual funds, exchange-traded funds, and derivatives. Choose the best option suitable for you to earn maximum returns.

Stocks are also divided into categories based on the investment amount. They range from large-cap stocks to middle to small-cap stocks. Therefore, buyers can make investments as per their capabilities.

Points to remember

  • Before investing, take into consideration all the factors related to it. Having a precise idea about your investment amount, the duration of the investment, and the ultimate financial goal is the key to success. Taking unreasonable risks will only fail and extreme financial loss.
  • One should invest from time to time to get better in their investment judgements and acquire maximum knowledge.
  • Investing in different assets makes for an impressive portfolio and helps in discovering investments with high potentials. The risk factor is significantly reduced with diverse investments as there is always something to fall back upon.

Now that you understand the stock market better, don't hesitate to invest in it if allowed by your finances. Investing is just a skill that gets better with practice and experience.

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