Stock Market Basics for Beginners

The very goal of investment is to make your money work in your favour. The most time-tested way to grow wealth is investment. As fruitful as investment may be, there are some legendary investors who can give you tips to make sound choices to build wealth. 

For instance, whether you turn your view to the stock market to invest or any other channels, top investors define investment as “forgoing consumption now in order to have the ability to consume more at a later date”. These are the words of the most looked-up-to financial wizard on the planet, Warren Buffet. They very likely could be words to describe how to invest in the stock markets as well. 

Invest Small Amounts Regularly

New investors are enthralled by the appeal of the stock market. However, a certain degree of knowledge, at least fundamental concepts, should be acquired before investing. By making small investments over a long span, your money can grow over long periods. That is why, if you want to explore stock investment, you should begin early in your life. If you can afford to spare some cash, you can try to start with equity investment in small amounts regularly.

Learn About Shares

As a new investor, you may have already come across specific terms like upcoming IPO and stocks and shares, but have a limited idea of what different concepts mean. You can get to the upcoming IPO part later, after you learn a few fundamentals of what the stock market entails. The stock market deals with the purchase and sale of shares of a variety of companies. Shares or stocks that are bought by investors translate to owning a portion of the value of any given company. Therefore, if you buy ten shares of a particular company from the stock exchange, you become a shareholder in the company – you own a part of it. In terms of percentages, if you buy 1% of the stocks or shares traded of a company, you technically own 1% of the company. 

Open Your Accounts

The first thing to do as an activity, if you wish to invest in stocks, is to open a demat account with a solid broker. This account is an electronic account that stores the stocks you buy. It is linked to a trading account which enables you to “trade”, that is, buy and sell shares from the investment market (a stock exchange, for instance). Both of these accounts are further connected to your bank account to have money available to buy shares, and in the case of share sales, to make cash deposits you earn.

The Investment Market of Stocks in India

The next question you may have as a new and curious investor is, “Where do I buy shares from?” Shares of listed companies are sold via stock exchanges. These are platforms on which shares are bought or sold. In India, there are two main stock exchanges, the BSE (Bombay Stock Exchange), and the NSE (National Stock Exchange). 

Besides knowing about exchanges, new investors should know what SEBI is. This acronym stands for the Securities and Exchange Board of India. It is the regulatory authority that governs all the activities undertaken by investors, companies, brokers, traders, etc. It also lays down security guidelines and creates measures for safe methods of trading on the stock market. 

When to Conduct Transactions on the Stock Market

Once you sign up with an online broker, you can get access to trading on a stock exchange easily. Through a trading account, it is easy to buy and sell stocks on the stock exchange. As all financial transactions are conducted online these days, the benefit that investors get while trading in stocks (buying or selling them) is that they can take advantage of price fluctuations. In light of this, investors should know about the times when stock markets function. The business hours of the stock market in India are from 9.00 am – 3.30 pm. However, there may be a few days when markets are shut, and these are usually festival holidays in the country, such as Republic Day, Holi, etc.