Last week, we saw how the Stock Market worked. This week, we’ll discuss how to really get started with investing in the stock market. Investing in the stock market can be easy and rewarding, especially for women because it can be done from home and doesn’t require you going to a workplace as such. However, before you can dive in, you need to set yourself up with, and acquaint yourself with a few resources that are essential for trading.
Opening a demat account
Before technology and the internet happened, the buying and selling of shares involved physical movement of paper certificates. Thankfully, today all shares are held and traded in their electronic form, which is referred to as ‘dematerialized’ or demat form. So, if you want to trade in shares, you will need a demat account.
A demat account is basically like a bank account for your shares. It will hold the stocks that you have purchased and/or have in your name. Almost every bank in the country has the demat account option and it is best if you open a demat account in the same bank that you already have an account in, because it will facilitate speedy transactions. You will need both a PAN card and an AADHAR number to set up a demat account.
Choosing a broker
Buying and selling shares, unfortunately, isn’t as simple as going to a place or website and placing an order. So, once you’ve opened your demat account, you need to find a broker.
A Share Broker is a person who is registered with the Securities Exchange Board of India to trade in the Stock Exchanges (for example, the Bombay Stock Exchange or the National Stock Exchange). The broker will buy and sell on your behalf and charge a small fee for the services that they provide.
Understanding how brokers work is the easy bit – take your time to find a broker who you are comfortable with. Ask friends and family who are investing in the share market, do a bit of googling and a make a few calls to better gauge the broker’s tone and attitude. It is important that you take your time with this step because if you and your broker aren’t on the same page, you could end up losing money.
Get set, go!
Once you’ve opened your demat account and found a reliable broker, you’re good to go. If you’re trading for the first time, it would be best to dip in cautiously instead of spending all your savings on buying shares.
Start with companies that are familiar to you and whose businesses you understand. It doesn’t matter if you can afford only 10 shares, but make sure you know what you’re getting into. Take your time to watch business news and track company performances to make informed decisions. The best time to ‘enter’ trading is when the stock market takes a dip, because that is when share prices dip as well and the best time to sell shares is when the stock market is doing well (since share prices increase), so make sure you’re constantly monitoring your investments.
A great way for stay-at-home moms and home makers to make some extra money, is to try day trading in the stock market. How does day trading work? Next week, on Rupee Rani.
Read the first part in Rupee Rani’s stock market series: Don't understand the stock market? Rupee Rani's super simple guide
Rupee Rani is a weekly column on finance for women. Write to us with your queries at firstname.lastname@example.org.