Tips to invest in the stock market

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Published: May 28, 2016 12:07:55 PM

With the upsurge in the stock market in recent times and promising growth prospects of the Indian economy, new as well as seasoned investors are finding equities as one of the better options to invest their money.

With the upsurge in the stock market in recent times and promising growth prospects of the Indian economy, new as well as seasoned investors are finding equities as one of the better options to invest their money.

Though investing in the stock market can be risky for new investors because of the constant fluctuations, it can also be extremely rewarding if an investor is focused, and invests intelligently.

If you are a new investor and looking to invest in the market, this exhaustive guide will take you through the complete process. To trade in the stock market you will need to open a trading and a demat account with a stock broker.

A trading account is used to place buy or sell orders in the stock market and manage your funds. Demat account is like a bank account to hold the certificates of your financial instruments like shares, bonds, government securities, mutual funds and exchange traded funds (ETFs).

You may choose a traditional stock brokerage, which will charge a higher brokerage and provide a relationship manager or you can simply choose a discount broker which provides online trading platform through mobile phones, laptop or desktop and charges a nominal brokerage.  The low brokerage is made possible as discount brokerages leverages technology that brings down cost of transactions.

The Documents needed to open the trading account are same for all kinds of brokers. The mandatory documents are:

PAN card: This is the most important document, without which you will not be able to open a Demat or Trading Account. You will need to submit self-attested clear Photostat of the Pan Card

Photos:  You will need two latest passport sized photographs of yours.

Valid Address Proof

Cancelled cheque which carries your name. If the cheque does not carry your name then it should be accompanied with latest 3 months bank statement. This is needed to link your bank account to the trading account to be opened with the broker.

Income Proof:  Like Latest Salary slip or 6 month bank statement or Latest Form 16 or ITR. This is not needed if you only want to trade in cash segment. But it is needed if you also want to trade in derivatives.

Please ensure that all the documents carry exactly the same name without any discrepancies to avoid filing any sort of declarations that are needed in case of name discrepancies. Also you need to show the original documents also to the representative sent by the broker or in case of online verification over the web camera.

You will also need to sign the demat and trading account kit to open the accounts. Make sure to read all the terms and conditions and list of charges and don’t just blindly sing any documents.

Before you start trading in the stock market, do remember a few Dos and Don’ts:

Invest only in good stocks: Select few good blue-chip stocks after checking the company performance in past, present and its strategies for the future. Stick to those stocks and give your portfolio time to fetch laurels for you.

Use only your surplus income to invest: Always remember, investments are subject to market risks. Invest only the surplus funds in the market. Always keep yourself liquid for unknown contingencies.

Never borrow to invest: Instead invest intelligently with whatever you have, so you are not burdened. Borrowed sum will always bring in a lot of stress. Why stress yourself? Play it slow, play it safe.

Avoid following what your peers do: It is a typical tendency of newbies to buy what people in your circle are buying. This is a wrong strategy. Be open and be aware of what people around you are buying, but use your intelligence to understand the pros and cons of investment. Have faith in your research, instead on someone else’s research.

Don’t follow Tips blindly, even from an expert: You may use the tips as an aid for your own research, don’t blindly follow tips. Also, tips might be biased at times and you may fall prey to them.

Don’t let fear or greed influence your decisions: Stocks can rise or fall unexpectedly in the dynamic market conditions. Always set your targets and your expectations from your investment.

Don’t ever panic in the market:  Remember if you have invested in good stocks, they will most likely not betray you. So don’t be influenced by crashes in the stock market.

Have a target: Even if your stock is performing exceptionally well, always remember the target you have set. Don’t try to be greedy. Book profit when you have achieved your target. If not, chances are the stock may come down after market settles and you will have to wait longer to achieve you target.

Do your research: Last but Most important thing is research, study, and have faith in your own research. There is no better thing than your own hard work and knowledge that you put in. There are no shortcuts.

The author is MD & CEO, Moneypalm. Views expressed here are personal.

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