Investing directly in stock markets is not the same as starting a SIP mutual fund. Both are market-linked investment options, but returns can vary widely. While returns from direct equity investments can be much higher during a market rally (depending on stock selection and industry), a portfolio comprised of frontline balanced mutual funds can report roughly 18-20% long-term stability. . However, the markets are volatile and you will need expertise, time, patience, financial advice and market research to pick the right stocks. Subscribing to a company’s initial public offering (IPO) is another good strategy for beginners. With IPOs, you can own shares of leading companies at one set price.
With the current pace of investor onboarding and the sentiment around LIC’s IPO, it will come as no surprise if we get over 3-4 crore new Demat accounts this year. Here is a step-by-step guide for a novice stock market investor:
Choose a good brokerage platform
The first step in your investment journey is to register with a SEBI-registered stockbroker. There are two types of brokers: full service brokers and discount brokers. Most major full-service brokers also offer discounted plans (digital only).
Here, selecting the right brokerage platform is extremely important. Treat stock trading like any other e-commerce business. As you don’t make your online shopping decisions based on price alone, you also look for the ease of use of the platform, speed of delivery, seller’s warranty, return policy, etc. Likewise, when making investment decisions online, you need to consider the completeness of the service platform and not just the cost of the transaction. For beginners, it is ideal to opt for a broker that offers a bouquet of services such as low entry and exit charges, customer support, geographic reach and advisory service as well as ease of use. of the platform.
Always remember that you will not get a 30 day no questions asked return policy with your broker. Here, thorough market research is one of the most important services to look for.
Last but not least, check the credentials of the stockbroker before sharing your details.
Open a Demat & Trading account
You will need a Demat account, a trading account and a bank account to make purchases and sales on the exchange. Trading and Demat accounts can be opened digitally by most stockbrokers. All buying and selling is done through a trading account, while the Demat account holds the securities.
Choose the trading platform according to ease
You can start trading through a broker’s mobile app or web platform. It is transparent and orders can be placed online. Always make sure you receive the purchase slip at the end of the day. Keep track of transactions and collect account statements quarterly. Always verify transactions and do not share your password or OTP with anyone, not even broker representatives.
Your bank account will be linked to your trading account. To trade, you will need to transfer funds to your trading account using net banking or UPI. When you buy a stock, the amount must first be transferred to a broker account and similarly, after selling securities in Demat, the funds are transferred through a trading account to the bank account. In the case of an IPO, your account amount is locked in accordance with the amount of the IPO request through UPI and released or debited based on the allocation result.
Know your strategy
Before investing or starting to trade, it is important to determine your strategy. It may vary depending on your objectives, investment horizon, current capital and risk profile. Depending on your investor profile, your strategy can be active or passive, short-term or long-term, aggressive or moderate.
Returns will vary accordingly. Always remember that the higher the risk, the higher the returns and vice versa. For beginners, it is always recommended to use professional financial advice. To start, an investor should prefer the index majors and gradually move into other opportunities across all sectors, with an understanding of how the markets work. In addition, you must strictly follow the asset allocation determined with a financial advisor according to your profile and invest accordingly. Good investment!
(The author is Chief Operating Officer of Religare Broking Ltd)