How To Buy Shares | How to Invest in Stock Market

1. Get a PAN card

In order to buy shares, the first is to get a pan card. A Permanent Account Number (PAN) is the primary prerequisite, to invest in the stock market and buying shares. It is a unique 10 digit Alpha-Numeric number assigned to an individual by the Tax Authorities for assessing their tax liabilities. In India, the first thing you will need to be able to invest in shares in India is a PAN card, so get it first.

2. Find a Good Broker

The second step to buy shares is to find a broker. Transacting over stock exchange without the support of an intermediary is not an option. Numerous firms are offering you services when it comes to buying and selling of stocks or shares. It is worth spending some time on zeroing down a broker before you start buying or selling stocks. A broker is mandated to be registered and licensed by the Securities and Exchange Board of India (SEBI) – retains the right to allow you to buy and sell shares over the stock exchange. These brokers can be individuals or other online agencies as well.

3. Get a Demat and Trading Account

The third step to buy shares is to create a Demat and Trading account.Once you have a broker, you will now need a Demat and Trading account. You cannot hold shares in physical form, they have to be in a Dematerialized state, thus a Demat account does that for you. It will store the shares in your account in your name. The buying and selling of shares will also require a Trading account. It acts as an intermediary that facilitates the buying and selling. Usually, your broker takes care of all this. Whether you approach a broking firm, online agencies, or an individual broker.

4. Depository Participant

In order to buy shares, the fourth step is to select a depository participant. There is also a Depository Participant that you need to be aware of. There are two depositories in India: NSDL ( National Securities Depository Limited) and CDSL (Central Depository Services Limited).

These depositories have their agents in the form of Depository Participants who will provide an account to store the shares. However, it is not the same as a Demat and Trading account as in Demat it shows the number of shares you hold and the Trading account reflects the selling and buying occurred in your account. Depository Participants will hold the shares you bought and release those shares you sold. A depository could be a financial institution, broker, or any other entity that is responsible for the eventual transfer of shares.

5. UIN - If You Want to Invest Big

In order to buy shares, the fifth is to get a UIN number. In case you wish to invest big, for instance, if you want to trade for Rs. 1,00,000 or more at a single time you will need a UIN or Unique Identification Number.

6. Choose the Right Share and Purchase

In order to buy shares, the sixth step is to select the right shares and purchase. To buy and sell shares, you need to inform your broker about which share, the quantity, and at what price you wish to buy the shares.

For instance, if you wish to buy 20 shares of Reliance Industries Ltd when it reaches Rs. 895, you have to inform the broker : Share: Reliance Industries Ltd., Quantity: 20, Price: 895.

Online brokers usually have customer care numbers where you can place your order if you do not have access to the internet. Further, when the share reaches that price, a transaction will be made on your behalf. However, the buy and sell orders remain valid only up to a certain time frame, usually the same day or the next. If the buy or sell price is not reached during that time frame, the order is cancelled and you need to place a new order.

The buying and selling take place in 2 exchanges: BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) the only two exchanges in India. You need to mention the exchange to your broker, as there is usually a minor difference in the price of shares at the two exchanges.

Thus, for purchasing shares, you need to follow SEBI-mandated rules. You must always remember to choose a trusted broker for trading in stock markets. Choose the method of investment based on your long-term financial goals, and make the right to buy and sell decisions after considering the market movement and the price of the share.

1. Understand The Basics

In order to buy shares, take time to learn the basics about the stock market and the individual securities composing the market. Understanding the contrast between an ETF and a mutual fund, the purpose of an index, and the real meaning of risk should be information that is at your fingertips. There is an old proverb: It is not a stock market, but a market of stocks.

2. Think in Terms of Risk vs. Return

If you wish for higher returns, you need to buy stocks that carry more risk. However, if you don’t want to invest in risky stocks, you will have to settle for those with lower returns. Many investors fall somewhere in the mid of being extremely risk-ready and risk-averse.

3. Understand How Market Expectations Work

Too many investors fail to understand that the market’s expectations for a given company are built into the stock’s price. This means it’s not enough to invest in a company that will have above-average growth. You need to analyse a company that will grow more than the market expects it to. This includes analysing the company’s future growth rates than all of the industry’s highly trained professionals.

The key to buying stocks is to choose a strategy with a level of risk that you can accept, and one you can carry out. Here are some of the best strategies to buy shares:

1. Set Long-Term Goals

Before investing, you should understand your purpose and the future time frame when you may have need of the funds. If you need your investment returns within a few years, consider another investment. The stock market with its volatility won't provide any certainty that all of your capital will be available when needed.

By calculating how much capital and the time period when you will need it, you can calculate how much you should invest and what kind of return on your investment will be needed to produce the desired result.

2. Buy Low, Sell High

This point is quite obvious—buying stocks when they are priced lower, and selling them when they are priced higher. But it tends to be as troublesome as walking away from the Vegas blackjack table when you’re on a winning streak. To protect your stock portfolio from above-average risk, harvest the stocks that have done well and put those gains into stocks that have underperformed.

It seems illogical, perhaps, but that’s the essence of rebalancing a portfolio. So if your stock’s standard deviation is 10%, and it drops more than 20% in a short span of time, it may be a good time to rebalance and buy more of that stock—because you know it will likely rise again.

3. Assess a stock’s volatility

To foresee a company’s volatility and avoid your emotional reaction to a sudden downfall in stock value, you need to look at its rolling 12-month standard deviation over the past 10 years. In layman's terms, look at the stock’s average performance over that time span. A normal standard deviation is about 17%, which implies that it's totally typical for that stock to increment or abate in esteem by 17%.

• Can I buy stocks online without a broker?

There are options to buy stocks directly from companies online without a broker. Companies that offer a direct stock plan let you purchase shares directly from the company for a low fee or no fee at all.

• How will I know when to sell stocks?

If you’re purchasing stocks, you should be comfortable not touching your money for at least five years. That’s due to stock market volatility — it’s possible the value of your shares will go down before going up. You could consider selling your stocks if you need cash and they’ve risen in value, but doing so means you may pay capital gains taxes on the sale, and miss out on future gains over time.

• Are stocks and shares the same thing?

For the most part, yes. Owning “stock” and owning “shares” both mean you have ownership — or equity — in a company. Typically, you’ll see “shares” used to refer to the size of an ownership stake in a specific company, while “stock” often means equity as a whole. For example, you might hear investors say, “I bought 10 shares of Apple,” or “I have stock in Apple, Facebook and Amazon.”

• How much amount do I need to purchase stock?

If you open a brokerage account with no account minimums and zero transaction fees, you could start investing with just enough to buy a single share. Depending on the company, that could be as little as $10

• Is there any time for buying shares or doing a trade?

Yes, the normal trading timings are between 9:15 AM to 03:30 PM. However, you can also place orders through AMO(After Market Order)

• How shares from a discount broker can be transferred to another discount broker or full broker without having DIS?

Without a DIS slip, you can transfer your shares from one discount broker to another through the online process. Here, you are required to register with CDSL through their website.

• What is a Dividend?

A dividend is basically a part of profit distributed by the company among its investors. It is usually referred to as a face value of the share or percentage of the paid-up value.

• What is Bonus Share?

It is a type of share issued by companies to their shareholders which is free of cost by the capitalization of accumulated reserves from the profits earned in the earlier years.

• What is the Stock Exchange?

A Stock Exchange is a platform to buy and sell shares in an organized manner. At present, there are nearly 25 recognized stock exchanges in the country that are governed by the Securities Contact (Regulation) Act, 1956.

• Is it mandatory to sign an agreement with the broker?

Yes, you have to sign the “Member-Client agreement” for the purpose of engaging a broker to execute trades on your behalf from time to time and furnish details relating to yourself to enable the member to maintain Client Registration Form.