Investing in shares and stocks is not everybody’s cup of tea. But by keeping tabs on stock prices and reading newspapers daily, one can make money grow. SHIBAJI ROYCHOUDHURY speaks to industry experts to bring you a report
Do you hide from the idea of share and stock trading because you don’t understand how the market worksIJ Well, it is time for you to reconsider. For beginners, investing in the stock market can be pretty intimidating and starting up can be a daunting task. So, what are the things that you must keep in mindIJ Relationship consultants say that, to begin with, one needs to simplify the basic principles to understand how the market works.
“The stock market has always been a maze to crack for a layman. For professionals, it has taken years of training to become proficient in this field. Yet, nowadays, there are plenty of people who are neither employed with any of the securities nor do they own a private consulting, yet, they are making money by investing in shares with the right approach,” Colonel Chanchal Mukherjee, a retired professional of the Indian Army, who is avidly into daily stock trading, tells you.
It is the era of investment. People are investing in all sorts of items like gold, silver, various Government offered investment schemes, property. However, if one can crack the complexities of the market, stock trading is the best tool to make millions in a short span of time. So the big question is, how does a non-professional or a layman approach stock tradingIJ
In order to start buying stocks and shares, one needs to two basic accounts — the demat and trading account.
The demat is meant for holding the stocks in dematerialised format. One can open this account with most private/Government banks. The procedure is as simple as opening a savings account. For trading account, one will have to link this to the demat account. It is through the trading account that the money for buying and selling shares is managed. One can open a trading account in the same bank as the demat account.
“There are three ways of trading in the market. Either one can choose a securities company with renowned trading companies like, India Bulls, Kotak Mahindra Securities, Share Khan, or one can also opt to give their money to an independent stock trader (but he has to be trustworthy) and finally, one can also attempt to understand the market and trade themselves,” Siddharth Dutta, an ex-relationship manager with India Bulls and presently an independent stock trader says.
As a new investor, it is wise to make the first few trades with small amount of money. The reason being that one needs to understand the working of the market first and to ensure that even if he/loses initially, it isn’t a huge loss.
“Most stock experts suggest that beginners should start by investing in undervalued stocks. If one choose stocks with lower potential but higher price, then the person is more likely to benefit in the longer run. Undervalued stocks usually grow faster and earn more that expected. However, this technique is proficient only with short-term trading as oppose to long-term investments,” Dutta tells you.
He adds saying that it is advisable that beginners start trading buying stocks of companies which the trader has an understanding off.
For instance, if a housewife is trading, she should start with investing in companies which are into beauty products, food products, fashion, cosmetics in which they have a better understanding. If however, she is tech-savvy, then she should aim to invest in technology companies and business houses.
Most novice traders wonder the amount of money that they should start investing with. “New traders should start trading with Rs 5,000 to Rs 20,000, as even if they incur loses, it wouldn’t hurt them financially,” Raghav Mandava, relationship manager, Share Khan says. Whether one chooses to trade independently or through a brokerage company, the purchase of shares of companies can’t be done directly from stock exchange. They have to be purchased through intermediate brokers.
Once the purchase is made, the particular stock reaches the demat account of the person (owner of share) in the specified settlement cycle (T plus two) through few transactional instructions or operations between the exchange and the broker. The dividend earned on the stocks is directly received in the savings bank account of the owner.
One also has to be careful when it comes to dealing with the share market. It has its share of cheats. “People must stay away from those brokers who offer them more than 50 per cent return. Also, those who guarantee returns. The only way, one can have a guaranteed return is if one has invested in a bank’s treasury bond and even that is a long-term investment. There are also several scam emails which lure people into lucrative investment opportunities,” Mandava tells you.