Investing money can increase your net worth and help you to meet your financial obligations in future. Stock market investments need wise decisions. You need to decide on investments based on your age, income and risk tolerance. The best way to start an investing journey is to understand the market nuances first. Also, you need a demat account to start your stock investing journey. Let us discuss the initial steps for beginners in stock market investing.
Opening Demat Account – One of the Initial Steps for Stock Investing
One should be aware that a demat account is required to store financial securities in the online stock system. It is the first step before foraying into the stock market. You need a demat account to hold your financial assets or investments you buy in the stock market.
What is Demat Account?
A demat account is an online account with a stockbroker registered with the central depositories. It allows you to take advantage of demat services in the online trading system. It can hold all your financial securities electronically with utmost safety as each transaction for debit or credit of securities in your demat account is completed under the surveillance of the SEBI (Securities Exchange Board of India). It allows you to receive corporate gains from the companies you have invested in, including, dividend income, split issues, etc.
What Are The First Steps To Investing For A Beginner?
As a beginner, you may have a small budget to start investing. Like most individuals, you can consider a leading discount brokerage firm offering demat services at affordable charges.
The online demat account opening process is straightforward that can be completed without stepping out of your home by following these steps:
- Refer to the discount broker’s official website and click on the “Open Account” tab.
- Provide basic personal details, like your name, mobile number, PAN, etc.
- Enter the bank account details.
- Choose a subscription plan designed for beginners.
- Upload KYC documents – PAN, Aadhaar, a canceled cheque, and e-sign.
- Record a short video while you read the provided script for in-person verification.
- Enter the OTP received on your mobile and verify it. Now you can submit your application. Shortly, you will get the message for account activation.
This way, online opening a demat account is easy and fast and takes only 15-20 minutes with ready digital copies of the basic required documents.
Become an Informed Investor
Top investors in India have witnessed incredible success in stock markets, following a disciplined approach and being prudent.
Investors need adequate knowledge to make wise investment decisions. Many need to be more familiar with the market mechanisms and online trading. You should understand how different aspects impact your returns on investments. Some of these are discussed below:
- Your financial goals
Every individual should set financial goals before investing. It is one of the bases for making investments. In general, an individual’s financial needs depend on the age, income, and needs of family members. Investors need to set priorities while setting goals. However, the financial plan is never static to meet your goals. It has to be reviewed from time to time to know how it will meet your goals.
- Your risk tolerance
Returns depend on the type of investment in the stock market. The higher the risk involved in an investment, the higher returns it will offer. You need to gauge your risk tolerance to choose an investment, and it is necessary to manage the risk first to enjoy its returns. Investors minimise their losses in order to save their capital and stay long in the market. You can consider this table to know a few investments:
|Equities||High||High||Moderate to High||Yes|
|Equity Mutual Funds||Low to high||High||High||No|
|Debt Mutual Funds||Moderate||Moderate||High||No|
- Your time horizon
You may want to accumulate funds over the period for many purposes. It can be a long-term one, like accumulating your retirement fund, education funds, etc., and short-term also, like buying the latest but costly device that can be an add-on to your profession, etc. Generally, investors prefer long-term investments as the stock market returns are lucrative for long-term investors.
Thus, you need to open your demat account and know your requirements to make investment decisions as your goals, risk-taking capacity, and time horizon.