How to Start Investing in the Stock Market?

People look to invest their surplus income to further grow their wealth. Strategic and disciplined trading over time supplements and replaces your income trading gives people the freedom to work from wherever they want, whenever they want and helps people achieve their financial goals. Today, with the help of electronic trading accounts, anyone can start trading.

Follow these 5 steps to start investing in stocks today:

1. Find the right broker:

   In India, people trade stocks on the following two platforms: Bombay Stock Exchange (BSE), established in 1875 and the oldest stock exchange in Asia; National Stock Exchange (NSE), the largest stock exchange in India.

   However, to gain access to these exchanges, retail traders need to register with brokerage firms or Depository Participants(DPs) first. It is important to find the right DP as retail investors will buy, store, and sell stocks through the interactive interface of the DP. It is preferable to open an electronic 2-in-1 Demat account and trading account with a DP, making investing and trading convenient. It also lets you see all your positions at a single glance.

   Certain DPs provide real-time market data to registered users. In the stock market, information is money, and the latest research can mean the difference between a profitable or a loss-making trade.

2. Submit your documents:

   To trade stocks, you will need a Demat account to store your positions electronically and a trading account to execute the trades. Here are the documents that are required to open such an account:

   1. Permanent Address Proof
   2. Identity Proof
   3. Identity Proof
   4. e-KYC - Certain DPs will let you link your AADHAR card to your trading account electronically, thereby removing the need for manually scanning your Aadhar card
   5. Additional information like the annual salary range may also be required.

IIFL provides a smooth application process to open an online Demat and trading account. The application process can be completed online thus saving loads of paperwork. IIFL also provides its registered users with cutting-edge data and analysis that helps them stay ahead of the game

Difference between trading and investing

Once all the documents are submitted, the DP will cross-check the submitted details and then provide you with the login details allowing you to trade. There are two distinct strategies that you can choose from:

1. Trading: In this strategy, you aim to turn short-term price fluctuations into profits and is majorly used by intraday traders who clear their positions by the end of the day. The aim here is to take large, voluminous positions and look to sell upon the smallest or price fluctuations.
2. Investing: Investing means holding your positions for long periods. The aim is to discover undervalued companies, buy their stock, and maintain your position in them through the temporary market ups and downs.

Conducting background research about a company

Before buying a company’s stock, it is important to conduct thorough research on the company’s background. A trader should consider the following factors:

1. The company’s revenue model
2. The company’s management stability
3. The company’s competitors, etc.

Build a diverse portfolio

While investing in the stock market, it is important to maintain a diverse portfolio. As a trader, your portfolio should be diverse to tackle the ups and downs in one sector. Traders should also look to invest in large-cap companies for stable but small returns, and small-cap companies for large but more unreliable returns.

Conclusion:

The stock market is a lucrative means of investing and can generate high returns, provided you follow the principles carefully. Keeping these tips in mind, you can begin to venture into investing in the stock market.