How To Invest In The Stock Market In India For Beginners [The Complete Guide]

How to Invest in the Stock Market In India For Beginners [The Complete Guide]
How to Invest in the Stock Market In India For Beginners [The Complete Guide]

To Be Honest, In India, people are not much financially literate no I’m not saying this on my own, Data says Only 2% of Indians invest in the stock market, In comparison USA 50% of people own stocks.

Most Indians don’t know how to invest money in the stock market in india?

So there is a huge lack of knowledge amongst Indians they think that they need a lot of money to invest money in the stock market.

Let me clarify that you don’t need a huge amount of money to invest in the stock market. you can start your investment journey with just 100Rs.

You have come to this page which means you want to start your investment journey. Congratulations to you if you decide to invest your money in the stock market.

Because you have taken the right decision, you know why people invest money in the stock market?? the biggest reason why people invest their money in the stock market is inflation.

Inflation is the decline of purchasing power of a given currency over time and consequently, the general level of prices of goods and services is rising.

For Example: 10 Years ago you could buy movie tickets for 100Rs, but today you have to pay 200Rs for the same ticket. So this increase in the price of 100Rs is called inflation.

Year by year value of your money keeps declining. The average inflation rate in India is around 4.5% to 6%, so if you want to beat the inflation you have to invest in those asset classes that can give you an interest rate of more than 6%.

If you want to beat inflation then one of the best options is to invest in the Stock market that can give you 10%, 12%, 20%, or even more than 50% interest on your investment, it totally depends upon you which company you choose for your investment.

Also, you can invest in Govt Bonds, FD, PPF, Digital Gold which can give you an average of 7% to 10% interest on your investment. it also depends entirely on your investment goals.

You know why rich people become richer because they are financially literate, instead of saving their money they invest their money.

Because they know that the value of money decreases over time. I’m not saying that they don’t save their money, but they save as much as is necessary. They also keep emergency funds with them.

How To Invest In The Stock Market In India For Beginners?

To start investing in the stock market you need few things so that you can start your investment journey!

  • Aadhar Card
  • PAN Card
  • Bank Account
  • Income Proof
  • Passport Size Photo
  • Demat Account
  • Trading Account

These things are necessary to start investing in the stock market in india.

Now you must be thinking in your mind what is this Demat account? Let me tell you that the meaning of Demat is dematerialization account, it means whenever you buy a share it will deposit in your Demat account.

A Demat account holds your shares and securities in an electronic form, (securities are govt bonds, mutual funds, etc).

it just the same as your Paytm or PhonePe account where your money saves in digital form.

With the help of trading account, you can buy or sell shares in the securities market whenever you want. You need both account trading and Demat accounts simultaneously.

To open a Demat account and trading account your Aadhar Card, PAN Card, Passport Size photos, Income proof, Saving Bank Account is necessary.

How To Open a Demat and Trading Account?

it’s very easy to open a Demat account, Now you might be thinking that how to choose a broker, let me tell you that there are so many Stockbroker Apps available in the market like Zerodha, Grow, Upstox, Angel Broking, etc.

Before opening a Demat account you should check their reviews on the internet and find out what people are talking about them, Although these brokers are registered by the govt.

Still don’t forget to do research from your behalf, With the help of these apps, you can open your Demat account and trading account.

these apps are work as a broker or you can say intermediate, stockbrokers are essential, you can buy or sell stocks through these brokers.

Discount vs. Full-Service Broker, Who Is Best For You?

As you know that Demat and Trading accounts are necessary to start investing in the stock market you cannot start your investment journey without these two accounts.

When you open the Demat account there are so many questions that come to your mind, You open the Demat account with a brokerage firm but there are so many stockbrokers available in India.

Some of them are full-service stockbrokers and some are discounted brokers. So there is lots of question come to your mind which one is best for you discounted or full service? and what is the difference between them?

To whom should we open our account? All these questions keep wandering in the mind of beginners.

So Don’t worry we’ll clear your all doubt with whom you should open your account. Basically, there are two types of brokerage available in the market.

  • Full Service
  • Discounted

1. Full-Service Brokerage

i) The full-Service brokerage provides all types of services like research advisory, investment services, portfolio management services, on-call support, etc.

ii) Whenever you have queries they appoint a relationship manager for you which helps you to resolve your queries. also they provide call and trade service free for their customer.

It means whenever you want to buy or sell any shares you can call them to execute your order.

iii) They have multiple branches at multiple locations and they provide both online and offline services to their customers.

iv) Their brokerage charges are higher than the discounted brokers which are around 0.1% to 0.7%. I know you are thinking that it is not too much, you will not see its effect right now, its effect appears after a long time and it spoils your compounding.

Example: ICICI Direct, Kotak Securities, Axis Direct

2. Discounted Broker

i) Unlike Full-Service broker they have limited services, they do not provide you a relationship manager so if you have any queries you will have to mail them.

ii) they charge you a fee to provide call and trade service, they never provide you stock recommendation tips. also, they do not provide you research advisory, investment services, IPO Application services.

iii) Their brokerage fees are not as high as full-service brokers and low transaction costs.

iv) they have limited branches and offer online services.

Example: Zerodha, Upstox, Groww, 5Paisa

So now the question is which one broker is best for you?

Let’s first talk about the full-service broker!

  • It totally depends upon what is your requirements. Mostly experience investors choose discount brokers because they have better experience in the market.
  • If you are new in the market or can say you are a beginner and totally unaware of how to buy or sell stocks. And you need guidance then you should go for a Full-Service Broker.
  • You have a significant amount of money and can pay extra money to the broker to research on behalf of you.
  • You don’t have enough amount of time to research for stock and manage the portfolio then you can go for a full-service broker.

Discount Broker!

  • If you want to do your own research and you don’t want to depend on others for your investment decision.
  • If You don’t have enough money and want to save on brokerage charge then you can go for a Discount Broker.
  • Want to explore the stock market deeply or you have enough time to research and analysis then definitely you should go for a Discounted Broker.

TBH: It’s very easy to buy and sell shares through a stock brokerage app, Interface of stock brokerage apps is so simple that you can easily buy or sell any stock within a second.

How Much Money Do I Need To Buy Stocks?

How much money do I need to buy stocks?
How much money do I need to buy stocks?

There is a myth in minds of people that they need lots of money to invest in the stock market, and because of that, they don’t invest money in the market.

But it’s not true, get this myth out of your mind. There are many stocks in the market whose price is less than 10Rs. Yes! Less Than 10Rs.

This doesn’t mean that you invest money in it. Do research thoroughly before buying such types of stocks. Because there can be many reasons behind the low price of such shares.

If you are new in the market start investing with a little amount don’t try to be smart by investing a big amount. As a beginner invest a little amount in the market and focus on learning as much as you can.

I know in the beginning it’s very difficult to find out how much money should we invest in the stocks? So for this, There is famous a thumbnail rule to invest in the market Which is known as a “100 Minus Age”.

Using this formula you can allocate your asset like Stocks, Bonds, FD, Gold, etc. This rule says subtract your age with 100, Let suppose you’r present age is 25 then subtract 25 from 100.

Present Age: 25

Formula: 100-Present Age=Investment allocation

Now, 100-25=70

So, This formula says you should invest 70% of your money in stocks and 30% in other asset classes.

If you are younger now or in your 20s then you can take more risk than the person who is 50 or 60, the lesser the age higher the risk-taking capacity.

I hope you have come to know how much risk you should take in the stock market and how much you can invest.

Things To Keep In Mind Before You Start Investing

1. Have A Logical Expectation and Keep patience

Let me clear one thing here don’t expect too much from the stock market because you know what happened when you expect too much, Your stock may or may not give you higher-than-expected returns.

Warren Buffett, Who is the richest person on the planet earth and also the most successful investor in the world says “Successful Investing Takes Time, Discipline and Patience. No Matter How Great Talent or Effort Some Things Just Take Time, You can’t Produce Baby In One Month By Getting Nine Women Pregnant”.

The secret behind the success of Warren Buffett is patience, I think you now understand that if you want to enter the stock market then you have to be patience.

It’s not a magic tool that will make you rich overnight, there are many people who have become rich from the stock market But there are so many people who lost their money in this market.

People who are rich from the stock market and make a lot of profit are able to do so because they always have patience. but on another side those who have always lost their money in the stock market, never have patience.

Have a logical expectation from the share market, don’t set your unrealistic expectations from the stocks. Always remember the most important thing in the stock market is patience.

2. Set Your Investment Goals

Before Invest your money in the market make sure what is your investment plan, Ask yourself why are you investing in the stock market?

Make your goal clear you should have clarity in your mind why am I investing money in a particular stock? Do you really know what do you want?

If you are new in the market don’t make long-term goals of 20-30 years early, set 3-5 years goals it can be anything.

for example “Maybe you want to go abroad in 3-5 years, Maybe you want to buy a house or you want to save money for your wedding or sister wedding” anything it can be.

that’s why you want to invest your money in the stock market, So make sure to set your investment goals before entering into the share market.

3. Take basic Knowledge Of The Stock Market

Before Invest in the stock market always take basic knowledge about it don’t invest without taking the basic knowledge of the stock market.

There are many peoples who watch videos somewhere else that someone is making a lot of money from the stock market and you get excited and start dreaming.

You think that Wooow! if he is making a lot of money just buying and selling shares so why can’t I? But you do not see the hard work behind it. picking up the share is not as easy as it looks.

4. You are not buying shares you are buying a company

You may be wondering what does it mean that you are not buying shares, you are buying a company? Basically, I want to tell you that when you are buying shares it means you are buying a small part of the company.

Share means ownership of a company when you are buying a share it means you are buying ownership of the company, Now it’s completely up to you how many shares you want to buy!

Never buy companies you don’t understand. Do not try to buy shares of those companies without understanding the business model of the company.

Buy shares of those companies which you understand, If you still don’t understand, so let me give you the example there are so many products you use in your daily life and there is a company behind that.

Example: Colgate For toothpaste, Dabur Amla For Hair Oil, SBI, Kotak, HDFC Bank For Saving or Current Account, Nestle For Maggi, etc.

There are many products that you use every day but you are not aware of them. So from today, it’s your task whatever product you use in your daily life find out the company behind that.

If you understand that product after that check whether the company is listed on the stock exchange Like BSE (Bombay Stock Exchange) or NSE (National Stock Exchange).

Don’t identify the stock, identify the business if you don’t understand the business then don’t buy that stock.

5. Always Diversify Your Portfolio

Always Diversify Your Portfolio
Always Diversify Your Portfolio

Diversify portfolio means collection of financial assets/instruments or securities like Stocks, Bonds, Mutual Funds, Gold, Real State, EPF, etc by investors.

Experience Investors always diversify their portfolios to minimize the risk on their investments.

For Example: If you invest your all savings in a particular stock suppose it’s a Tata Motor stock from the automobile sector and assume that the stock will not perform as you expected.

Then what will happen obviously you’ll be disappointed, but if you would have been diversified your portfolio then you wouldn’t have disappointed.

So don’t invest all your saving in a particular stock or sector, if you don’t know the sector. Let me tell you that sector is in which businesses share the same or related products and services.

So there is a different-different sector like-Finance Sector, Real State Sector, Consumer Durable, FMCG Sector, Energy Sector, Healthcare Sector, IT Sector, Chemical Sector, etc.

I hope you understand now, Therefore don’t buy a particular sector stock diversify your portfolio, and buy stocks from different sectors.

It hedges (save) your portfolio in difficult times, basically, the aim of it is to lose less in bedtime.

Don’ts Which You Must Follow to invest in the stock market for beginners!

1. Don’t Spend Blindly 

There are so many people in the market who invest money in the stock market blindly they think that if they invest all of their savings in the stock market they’ll become rich overnight.

If you are thinking in a similar way then my friend, I am sorry to tell you that you are wrong here because it is not an investment, it is called speculation.

Invest 20% of your income in Securities like Stocks, Bonds, Gold, FD, etc. Don’t invest 70% to 80% of your income in stocks because that day will not be away, the day you will be a pauper.

Invest your only that surplus amount which you willing to lose you must have heard this “Risk Hai To Ishq Hai” but don’t follow it, you should avoid taking the risk in the stock market.

There is no guarantee that you will make money from the stock market every month.

There is no magic to get rich overnight from the stock market. you may get lucky once but not again and again. The stock market is an art and you cannot become an artist overnight.

And if you want to master this art you should have a learning attitude should have patience. The more you practice more you become a master of this art.

2. Don’t Break the Discipline

If you have made up your mind to invest in the share market then stick to your plan, Keep Investing a small chunk of your income in the securities.

And the best option for this is to do SIP(Systematic Investment Plan) because it will give you benefit in the long term. If you don’t break the monthly investment plan then your money will compound in the long term.

After few years your money will become so much that you would never have expected it. But it requires patience and consistency if you break the SIP then you’ll not get the benefit of compounding.

3. Don’t Follow The Advice Or Tips

This is one of the most important factors which you should keep in your mind! it’s very often someone will give you the advice or tips to invest in that particular stock because it’ll perform well.

But Don’t take their advice whether they are your friend, your neighbor, family member. Because there are so many examples in the market who lost their money by just taking the advice of others.

I’m not saying don’t listen to them completely but after listening to them do your own research carefully.

4. Don’t Be An Emotional Fool

We, humans, are very emotional we humans often makes the emotional decision but it does not work in the share market. If you have bought a share. And you buy that share after a lot of research and study.

Then Believe in yourself don’t sell that share within a month buy seeing that its share price going down or going up. because the price of the share will not remain constant.

Sometimes it’ll go up and sometimes it goes down because demand and supply keep changing continuously, But Fundamental of the company is strong then share price doesn’t matter Once you buy.

don’t buy the share because it’s looking attractive, the company is making a profit today but may not make a profit in the future. So do proper research from your side.

Don’t check the share price daily it creates panic once you got panic you’ll lose your money. That’s why keep in mind don’t make emotional decisions.

These are some don’ts that you should follow while investing in the stock market!

Which company share is best?

To find the best stock you have to find the company whose business fundamental is strong. You’ll have to find a strong business, I already told you that you are not buying a stock you are buying a company.

To buy the best stock you have to do a complete Fundamental analysis of a company, if you don’t do the complete research from your side then you will regret when the company will not give the expected returns.

Therefore find the company that has the potential to grow in the future. Analyze the Profit&Loss Statement of the company properly and see if this company is making a profit every year?

Analyze the company balance sheet to check what is the assets and liabilities of the company, Analyze the cash flow statement of the company to check that how much cash company has in its hand.

According to investors, the best stocks are those stocks that give expected or more than expected returns to an investor in a year.

If the company is giving 12% or more than a 12% return every year then you can say, that the company stock is the best share/stock.

Here are a few of the best stock in India; Reliance, HDFC Bank, Hindustan Unilever, HDF, Bajaj Finance, SBI, Asian Paint, Kotak Mahindra Bank,

But let me clear you one thing that it’s not a stock recommendation before buying any stock do your own proper research. because there is no guarantee that you will actually get a higher return by accepting more risk.

Can I earn money daily in the share market?

This is the basic question that arises in the mind of every beginner, My family and friends have asked many times this question that how to earn 1000Rs or How to earn 1lakh Rs per day in the stock market.

Basically, The most popular way to earn money in the stock market is through trading or investing.

Trading is just like buying and selling of the share on the same day & we called it Intraday trading. You can also hold your share for a few days or weeks and this is called Swing trading.

In trading, your goal is to buy the share at a cheap price then sell it for a higher price.

In investing your main goal to create wealth for the long term you don’t see the share price daily. Trading is riskier than investing because most people do speculation in trading.

There is a high chance to lose wealth in speculation, if you want to be a trader in the stock market then you must know technical analysis and fundamental analysis of the stock.

If we talk about how much money you can make in the stock market the answer is there is no limit you can earn any amount of money.

How do you make money from stock?

Capital Appreciation

You earn money from stock is through capital appreciation. Capital appreciation is a rise in an investment price. For example, If you buy a share for 100Rs and it rises up to 120Rs then you earn 20Rs as a capital appreciation.

The gain on the share price can go as high as 100% or more.

Dividends 

Apart from the capital appreciation companies give dividends per share to their shareholders. A dividend is a reward given by the company to its shareholders.

For Example, A Company X has decided to give 20Rs per share dividend to its shareholders & the current market price of the share is 100Rs. Then Dividend yield will be 20%

Dividend yield= Dividend Paid/Current Price Of Share *100

Dividend yield=20/100*100=20%.

Companies partially distribute profit with their shareholders by declaring dividends and keeps the rest of the money to invest in the company or keep it as a reserve.

company’s dividends are decided by its board of directors. it’s not necessary to give dividends to shareholders it’s optional.

There are so many companies in India who gives dividend to their shareholders. Like ITC, Baja Auto, GAIL, OIL India, etc.

Can I buy shares today and sell tomorrow?

Yes, you can buy shares today and sell tomorrow, It is usually called BTST in trading. The full form of the BTST is Buy Today And Sell Tomorrow!

You can sell the shares before they credit to your account, Often what happens that you cannot sell shares before they credit or delivered to your account in normal trading.

It takes 2 days to credit the share to your account. however, you get a concession in BTST trading due to which you can buy shares today and sell tomorrow.

But I have already told you that trading without technical and fundamental knowledge is very dangerous and risky.

Conclusion 

I have tried to answer all the question which arise in the minds of beginner’s, I hope this post is helpful for you and now you know how to invest in the stock market in India. So don’t wait for the right time the best time was yesterday, the best next time is now. If you still have any queries then comment below, I would be very happy to help you

FAQ – How To Invest In Stock Market In India

Q1. Can I invest 100 RS in the share market?

Ans. Yes, You can invest Rs 100 in the stock market there are many stocks that you can buy Between Rs 10 to Rs 100. You don’t need a large amount to invest in the stock market.

Q2. What are the best cheap stocks to buy?

Ans.

Company Name 

Share Price 

Vodafone Idea LTD

10.20

Yes Bank Ltd LTD

15.95

TV18 Broadcast LTD

30

Punjab National Bank LTD

38.15

IDBI Bank LTD

36.10

BHEL LTD

50.10

IDFC First Bank LTD

60.85

SAIL LTD

72.05

Adani Power LTD

87.25

Indian Oil Corporation LTD

98.05

Q3. Where should a beginner invest?

Ans. As a beginner, you should start your investment journey with a mutual fund, but if you want to buy stock directly from the stock market then you should buy blue-chip stock. Because it’s less risky than the growth stock or small-cap stocks. Avoid taking risks in the stock market.

Q4. How to buy Stocks in India without a broker?

Ans. Yes, you can buy stocks without a broker in the stock market in India. If you don’t have enough amount of money to pay a broker for his brokerage charges. still, you can directly purchase stocks from the company through the Direct Stock Purchase Plan (DSPP).

The company in which you want to invest gives you the option to buy shares directly with the help of a transfer agent. The company itself appoints a transfer agent so that their investor can buy the shares of the company directly from them.

Next articleWhat Is ESOPs How Does It Work? | How You Can Skyrocket Your Wealth With ESOPs
I love value investing, My goal is to create financial awareness in India For this I created a “unlockmyfinance” website and on this website, I teach people about finance & stock market

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