The stock market is a tempting sphere to explore. If you are willing to endure certain risks, stocks can give you high returns. One needs to do complete research about the business they are considering investing in , as well as remain invested for the long haul in order to reap maximum benefits. There are a few golden rules that can help you choose the best shares to buy. This article is a guide on how to buy stocks for beginners.
How to buy stock?
Step 1: Find a Broker
You can not buy or sell stocks directly on the stock exchange. This is the reason you need a broker. A broker is an individual, company or online agency that is registered and licensed by SEBI to buy and sell shares on the stock exchange. You may find brokers online through several websites and apps such as Groww that simplifies investing in the stock market. It even provides a proper guide to invest in the right place. If you are thinking about how to invest in stocks online, you just need to install this app and follow its instructions.
Step 2: Get a DEMAT account
To invest in the stock market, you need a DEMAT and trading account. A DEMAT account keeps a record of your shares in electronic form. You need to provide your PAN card details and other personal details in order to get a demat account. CDSL and NDSL provide demat and trading accounts in India. You can get it through a broker. Investing in the stock exchange has become easier with the digitalization of brokers.
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Step 3: Do your homework
When investing in the stock market, you should have a clear idea of all the aspects of shares. You can start your study of the depositories. NSDL and CDSL are the depositories in India that serve as links between companies listed in the stock exchange and the shareholders. You should follow up on stock market news to become acquainted with the terms and trends. In case you are too lazy to perform this study, just opt for professional advice. This will ensure that you invest in the right place. You can even search how to invest in stock online to find different apps and websites providing expert advice.
Step 4: Set your Investment Goals
In this market-linked investment, high returns and high risk come hand in hand. Every step should be taken carefully when entering the stock market. You must have a clear and well-defined investment plan. You have to be sure how much you can invest, how much return you are expecting from it and how long can you wait to get that return. There may be high risk but when you get a good return out of it, there are chances you will indulge more into it.
Step 5: Buy Shares
After a detailed comparison, when you know which are the best shares to buy, inform the broker of the Company whose share you want to buy, the number and price of purchase. The broker buys the shares on your behalf when the said price is reached. The buy order is valid for a given time. If your buying price is not reached within the mentioned period, your buy order is considered canceled. You need to lay a new order in such a case.
Step 6: Monitor the Shares
Every company shares dividend with its shareholders based on the number of shares they hold. When you buy one share of stock, you own a share of the company and can share the profit it has earned. After buying a share, it is essential to keep a watch on the rise and fall of the share values of the companies. When the value of the company increases, the value of the shares also increases. One can sell off his shares at this time at a much higher rate than he had bought it. You should develop an idea of when to buy and when to sell the shares to get high returns from your investment.
Things to consider before investing in a company
There are a few factors that you must look into before making an investment decision so that you fetch a good return at the end of the term. Always remember, you can gain wealth even if you buy one share of stock correctly.
Business Model
When you are thinking of investing in a company, you should research its business model, its management, its position in the industry, past records and its future prospects. You can earn better returns only when the company grows.
Financial Analysis
This can be considered as the fundamental analysis before buying a share of a company. You must go through the financial performance of the company over a considerably long period to understand the growth rate and profits earned by the company.
Dividend Yield
A dividend is a form of income from shares and if a company provides you a regular payment of dividends, it’s a sign that their cash flow is stable enough to send you regular dividends. It is advisable to invest in a regular dividend-paying company.
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Different Sources of information
You should go through the offer documents, annual reports, BSE/ NSE announcements, and company press releases to gather information about several companies. They provide you enough knowledge to compare the value of shares and the prospect of the rise of the value of these shares. Following business dailies and other media can also serve this purpose.
The stock exchange is a fascinating world that can become a game-changer in your life. You just need to play it as a game keeping the rules in mind and chances are you will surely receive the jackpot. All the important aspects of the stock market have been covered in this article. Hopefully, this will answer all the questions related to how to buy stocks for beginners.
