How to Invest in Share Market in India? An Ultimate Beginner’s Guide!

How to Invest in Share Market in India?

                                               A Complete Guide for Beginners to Learn How to Invest in Share Market in India: Hello Investors. Today we are going to discuss one of the most elementary topics for a newbie- How to invest in share market in India? I have been planning to write this post for a number of days as there are many people who are willing to invest, however, do not know how to invest in share market. Through this article, they will get the answers to their question and learn the step-by-step process of how a beginner can start investing in the Indian share market.

Please note that this post might be a little longer as I am trying to cover all the basics that a beginner should know before entering the stock investment world. Make sure that you read the article till the end, cause it will be definitely worthwhile reading it. Let’s get started.

Pre-requisites Before You Start Investing

For investing in the Indian stock market, there are a few pre-requisites that I would like to mention first. Here are the few things that you will need to invest in share market:

1. Bank Savings account
2. Trading and Demat account
3. Computer/laptop/mobile
4. Internet connection

For opening a demat and trading account (usually opened altogether and called 2-in-1 account), the following documents are required:

1. PAN Card
2. Aadhar card (for address proof)
3. Canceled cheque/Bank Statement/Passbook
4. Passport size photos

You can have your savings account in any private/public Indian bank.

Where to open your trading and demat account?

Get your documents ready. If you do not have a PAN card, then apply as soon as possible (if you are 18 years old or above).

3 Basic Advice Before You Start Investing

When you are new to the stock market, you enter with lots of dreams and expectations. You might be planning to invest your savings and make lakhs in return.

Although there are hundreds of examples of people who had created huge wealth from the stock market, however, there are also thousands who didn’t.

Here are a few cautionary points for people who are just entering the world of investing.

— Pay down your ‘High-Interest’ debts first

If you have any kind of high-interest paying debts like personal loans, credit card dues debts, etc, then pay them first. The interests of these loans can be even as high as your returns from the market. There is no point in wasting your energy to give all the returns you made from the market as interests of your debts. Pay down these debts before entering the market.

— Invest only your additional/ surplus fund

Stop right there if you are planning to invest your next semester tuition fee, next month flat rent, savings for your daughter’s marriage which is going to happen next year or any similar reasons.

Only invest the amount that won’t affect your daily life. In addition, investing in debts/loans is really a bad idea, especially when you are new and learning how to invest in the share market.

— Keep some cash in hand

The cash in hand doesn’t just serve as your emergency fund. It also serves as your key to freedom. You can take big steps like changing your little flat, or quit your annoying job or simply shifting to a new city, only when you have cash in hand.

Do not get trapped by investing all your money and later losing your freedom. Do not sacrifice your personal freedom in the name of financial freedom.

How to Invest in Share Market in India?

Step 1: Define your investment goals

if you are starting for Goal-Based Investing, do remember that the time frame for different investment goals will be different. Your goal can be anything like buying a new house, new car, funding your higher education, children’s marriage, retirement, etc. However, if you are investing in your retirement, then you have a bigger time frame compared to if you are investing in buying your first house.

Step 2: Create a plan/strategy

There’s a common misconception among our society that you need large savings to get started. Say, one lakh or above. But that’s not true.  As a thumb rule, first, build an emergency fund, and next start allocating a fixed amount let’s say 10-20% of your monthly income to save and invest. You can use the remaining portion of your earnings for paying your bills, mortgages, etc. Nevertheless, even if your allocated amount turns out to be Rs 3-5k or more, it’s good enough to build an investing habit.

Step 3: Read some investing books.

There are a number of decent books on stock market investing that you can read to brush up on the basics. Few good books that I will suggest the beginners should read are:

1.The Intelligent Investor by Benjamin Graham

2.One up on wall street by Peter Lynch

3.Common stocks and uncommon profits by Philip Fisher

4.The Dhandho Investor by Mohnish Pabrai

5.The little book that beats the market by Joel Greenblatt         

 Deciding on an online broker is one of the biggest steps that you need to take. There are two types of stockbrokers in India:

1. Full-service brokers
2. Discount brokers

— Full-Service Brokers (Traditional Brokers)

They are traditional brokers who provide trading, research, and advisory facility for stocks, commodities, and currency. These brokers charge commissions on every trade their clients execute. They also facilitate investing in Forex, Mutual Funds, IPOs, FDs, Bonds, and Insurance.

Few examples of full-time brokers are ICICIDirect, Kotak Security, HDFC Sec, Sharekhan, Motilal Oswal, etc

— Discount Brokers (Budget Brokers)

Discount brokers just provide the trading facility for their clients. They do not offer advisory and hence suitable for a ‘do-it-yourself’ type of clients. They offer low brokerage, high speed and a decent platform for trading in stocks, commodities, and currency derivatives.

A few examples of discount brokers are Zerodha, Upstocs, 5 Paisa, Trade Smart Online, Paytm Money, Groww, etc.

Step 5: Start researching common stocks and invest.

Start noticing the companies around you. If you like the product or services of any company, dig deeper to find out more about its parent company, like whether it is listed on the stock exchange or not, what is its current share price, etc.

Most of the products or services that you use in day to day life — From soap, shampoo, cigarettes, bank, petrol pump, SIM card or even your inner wears, there is a company behind everyone. Start researching about them.

For example- if you’ve been using HDFC debit/credit card for a long time and satisfied with the experience, then investigate further about HDFC Bank. The information of all the listed companies in India is publicly available. Just a simple ‘Google search’ of ‘HDFC share price’ will give you a lot of important pieces of information.         

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