To invest in the stock markets, you must open a Demat account.
To understand the what is Demat account, let’s assume you have a large inventory set and need to store it safely. You choose a place to store your inventory. When you purchase any new items, you store them with the rest of the inventory. You take it from your inventory when you need something, essentially removing it from your storage room. A Demat account serves a similar purpose. When you buy a company’s shares, they get accumulated or stored safely in your Demat account. Similarly, your shares get debited from your Demat account when you want to remove or close your position. How do these trades occur? You can buy and sell shares through your trading account. The trading account facilitates you to buy the shares that later on get deposited into your Demat account.
Once you open your Demat and Trading account with a brokerage firm, you are all set to invest in the stock markets.
Here is a guide to successful investing
- Others are Doing it; Maybe I Should Too
While investing, make sure you follow your own valuations. If you believe in a company and your valuations suggest its stock will go up, belief in yourself! Don’t go on what others are doing. A common mentality of investors is that if others are investing in a stock, they also tend to get driven towards buying it. You should conduct your own research, build your projections, work on your financial models and trust your valuations.
- Investing In A Big Brand
Investors tend to get attracted to big brands and companies, assuming these would always be profitable and yield a good Return On Investment. Investing in a company just because it is a big brand can cause you to blunder! The basis of stock market investing is to evaluate the fundamentals. You never know – A company might look glossy from the outside but may be heading towards bankruptcy. You need to do research on trading India before investing in any brand.
- Diversify your Holdings
You absolutely have to diversify your holdings in the markets. This is probably the most important key to generating good returns. Diversifying is the key to building an efficient portfolio. Let’s assume you invest most of your savings in buying stocks of a particular sector. A change in economic policy or market factors causes that sector to plummet. Now all your holdings are at stake! You need to ensure your holdings are well diversified. Investing in a broad range of sectors will reduce your risk. That way, if some of your holdings are in trouble, the other sectors are there in your portfolio to compensate for your losses.
- Invest From The Surplus Funds
You must always invest from your surplus funds or a part of your additional income. The stock markets are very volatile in nature. You wouldn’t want to invest your savings into it. If you enter into the markets with your savings, a downturn might wash off all your wealth. Not only this, your savings are the money you have kept aside for unexpected events. This money should stay kept, and when the need arises, it should be accessible to you. You cannot risk this money out to earn some extra returns, as it may not be there when you need it someday. The surplus or money you can do away with is the best for stock market investments. Even if there is a downturn, you will regret not gaining profits. But, your savings would still stay intact for future needs and emergencies.
- Hang in there
Once you have entered the stock markets, you need a lot of patience. Don’t get overwhelmed by the price volatility. Stick to your fundamentals, stay up to date, do your analysis and hang it there – you’ve got this.