Investing in the stock market is an option that could help you create wealth and meet your short- and long-term investment goals. Investment in shares over longer periods has proved to be profitable. There are several stocks trading in the Indian market, but as an investor, you need to understand that not all stocks are good. If you are wondering, “How can I buy shares?”, here is a detailed guide to help you make your first stock market investment.
How to buy a stock?
Step 1: First, open an online account with a stockbroker. There are several online brokers with whom you can open a trading account.
Step 2: Once you have chosen a stockbroker, you need to pay a fee and provide important documents like a photocopy of your PAN, income proof, bank statement, etc.
Step 3: After the documents are verified, all compliances are met, your account will be set up and activated.
Step 4: Now you can buy any stock you want within seconds. There are a few charges and taxes that you need to pay for buying and selling shares on an intraday basis. If you take delivery of shares, you will have to pay Demat charges too.
How to buy shares?
- Have a financial backup
There is no guaranteed return in the stock market. It may happen that after you buy a stock, the price falls and you may need to hold it for a long term to make a profit. So have an emergency fund. If you need money on an urgent basis, you can use the emergency fund instead of selling the stock at a loss.
- Understand your risk capacity
Large-cap stocks are less risky as compared to mid-cap and small-cap ones. The greater the risk, the greater the return. If you are planning to earn a high return, you need to have a higher risk appetite. Thus, before investing in risky stocks, understand your risk capacity. If your risk capacity is low, select less risky stocks. Don’t let greed ruin your finances.
- Make a diversified portfolio
Don’t put all your eggs in one basket. No matter how much capital you have, you shouldn’t invest the entire capital in a single stock or a single investment instrument. Build a diversified portfolio. Buy stocks that are not in the same sector. This will help you to have a balanced portfolio.
- Always buy low, and sell high
You can only earn a profit if you buy a stock at a lower price and sell at a higher price. A stock can be good, but if it is trading at a 52-week high price, the chances of you making a profit from that are low. Thus, once you have done your research and found a good stock, wait for the price to fall.
- Understand the management of a company and then invest
Companies are run by management. If the management is good, that company will perform well in the future. It is, thus, essential to look for companies with good management.
- Take expert advice
You are buying your first stock, so it is quite understandable that you would make mistakes. Therefore, it is advisable to seek expert advice to make smart investment decisions.
Take steps towards making your first stock investment
Reaching out to an expert to guide your mutual fund investments is a wise choice to make. A financial expert could help you to understand how to buy shares or stock and ensure that your investments are in line with your risk tolerance and financial goals.