The rising inflation and increasing prices of basic living in India are making it necessary to find some extra source of income. Since everyone wants to improve the lifestyle in which he/she is living currently and if not, then also we all want to at least maintain our current way of living. To do the same it is required to save money and invest it in a way that we can ensure a secure financial future. One of the ways to do the same is investing in shares.
Even though people consider share market investment as a risky affair, it works the best, if the decision is taken with diligence. So, if you are new and want to know how to invest in shares, then it is necessary to know the pre-requisites, the basic recommendation for investing in the share market, and how to invest in shares. Today in this article we are providing almost everything that you must know in order to invest in the share market.
Prerequisites for Investing in Shares
To invest in the Indian share market, it is recommended to be prepared with few things. The following are the prerequisites that you should have before investing in shares:
- Demat and trading account
- Savings account
- Internet connection
- Computer/ Mobile/ Laptop
To open a demat account; you should have the following documents:
- Aadhar card (for address proof)
- PAN card
- Bank passbook or canceled cheque
- Passport size photo
Your savings account can be in any public or private Indian bank.
These are the lists of documents that you require in order to invest in the stock market. If you do not have a PAN card, then you can apply for it, if you are equal to or more than 18 years old.
Basic Recommendations for Investing in the Stock Market
Most of us invest in the share market with high expectations, but not everyone gets success in this field. The reason for the same is investing in the share market without understanding it completely. If you want to be among those who are creating huge wealth from this secondary source of income, then you must keep the below cautionary points in mind:
- First Clear Your Debts:The first and foremost thing that you should do before starting to invest in the share market is clearing all your debts like dues of credit cards, education loan, car loan, and so on. This is not a good idea to pay all your earnings from the investment in paying your debts. So, clear all your debts first and then start investing in the share market.
- Try to Invest Your Surplus/ Additional Earnings: If you are planning to invest the money that you have kept for your child’s education or your house rent or from your semester fees, then stop immediately. It is not wise to invest the money that you keep for your day to day expenses or for some immediate requirements. It is recommended to invest the money that is surplus.
- Do Not Invest Your Entire Savings/Surplus Money: Another advice that top financial investors give is – keeping some money in your hand. It is common to invest your entire money in the share market when it starts giving you good returns; however, it is not advisable. This is because whatever you have in your account is your own money and you can use it whenever you want, especially when some emergency arrives.
How Can You Invest Wisely in the Share Market?
The steps to invest wisely in the share market are:
Step 1: Understand Your Investment Goals: It is necessary to know and understand your investment goals first. It is necessary to know what you need from your investment. You can have goals like buying a new car, or a new house, or funds for your higher education or retirement, etc.
So, if you are planning to invest in your higher education, then the investment timeframe has to be smaller than investing for retirement. Keep your goals in mind and then proceed further.
Step 2: Have Some Strategy or Plan: After understanding your goals, you should create your strategy for investment then.
Step 3: Select Some Good Stock Broker: Finalizing an online stock broker is one of the biggest steps to take. There are two types of stockbrokers available in Indian share market:
- Discount Brokers: The discount brokers offer the only trading facility to the clients. These brokers do not provide any advisory, thus it is suitable for you if you are a ‘do-it-yourself’ kind of investor. The brokerage of these brokers is low.
- Full-Service Brokers:These brokers not only offer trading facilities but also provide advisory facility and research for the currency, commodity, and shares. The commission of these brokers is comparatively higher.
Step 4: Do Research for Common Shares and then Invest: The next step is to do research and notice the companies for investment. If the product of a company is good and you like it, then it is recommended to research its parent company and find out whether this company is listed in the stock exchange or not, its current share prices, etc. This will give you an idea of whether you should invest in a company or not.
Step 5: Choose a Platform to Track the Performance of Your Shares: It is always wise to choose a platform to track your shares’ performance. There are a number of mobile stock trading apps and financial websites available online and you can use one for keeping a track on your stocks.
Step 6: Have Some Exit Plan:The best way to keep yourself away from share investment losses, is having an exit plan. You can exit from a share market in two ways. One is exiting through booking loss or booking profit. If your goals for which you are investing are met, you can happily exit the stock, whereas when the stock has fallen from your risk appetite, then you can exit easily as well.
Final Words: These are six steps that can assist you to make the right choices while you are investing in the share market. However, when you get started with an investment in the share market, it is suggested to not to get carried away as the share market is tricky and you may lose some money if you do not invest wisely. So, be wise and keep the above-mentioned steps in mind while investing your hard earned money in the share market. And for sports related news you can go on Esports, Ten Sports, ESPN.