How to invest in Share Market

Share Market has become extremely popular in current times with more people getting interested in getting good returns in their investment. A lot of people hurry up the whole process because they think that they are already late. Always remember, it’s never too late to start investing, it’s still not too late to start building a financial foundation even if you’re not satisfied with your current situation. Don’t hurry. Only invest when you have enough money in your emergency fund and have a capability to take risks and to withstand the idea of losing money.

Before you invest, try to ask yourself these 3 questions

  1. Do you have enough money in your emergency fund?
  2. How much risk can you tolerate
  3. How much liquidity do you have?
  4. Do you need long term returns or short term returns?

Your decisions on investing and choosing a right financial asset will be based on the answers of those 4 questions. You need not to invest all your money, considering the current pandemic times when there is limited or no job security. Before you start investing, make sure that you have enough money to cover your living expenses.

If you have figured out your budget and ready to invest, the next step is to get the entire knowledge about Share Market. Do not invest money when you are not familiar with the basics of share market. One mistake that people do is to look at the trend and not research about the company. It is very important to look at the financials of the company you are going to invest. Prices fluctuate regularly. A stock can touch top line in a day and bottom line in the next day. After you have figured out everything, next thing is to find how to invest in stock market.

  1. The first thing you need to do is to open a Demat and Trading account. Find a broker who can open both of them for you.
  2. To make money and stock transfers easier, this trading and demat account will be connected to your savings account.
  3. Find a stock that you have faith in. Do not invest in stocks only if they are in uptrend. The prices fluctuate every second and you cannot predict the future. Try to invest in blue chip stocks first.
  4. Diversify your portfolio. Do not invest all your money at one place. This is because it reduces the negative impact if a particular asset performs poorly. Diversification occurs across asset classes, industries, and cycles. It’s tempting to put all your money into an industry that’s on the rise. However, it is usually preferable to diversify across industries, balancing market size exposure, and hedging the risk of equity shares with stable but lower-yielding bonds.

COSTS INVOLVING SHARE MARKET

  • Brokerage fees: All brokers are paid a brokerage fee, which is a fee for facilitating a trade for you. These expenses are rapidly decreasing thanks to bargain brokers. They collect taxes and dues given to the government on each transaction, including the Securities Transaction Tax (STT), SEBI charges, and the Goods and Services Tax (GST), among others.
  • Account Opening Charges – Your broker or brokerage platform may open your demat account for you, but they do not manage it. To protect your interests, demat accounts are managed by central securities depositories such as NSDL or CDSL, which are regulated by the government. To keep your account active, you must pay a small yearly fee (usually collected by your broker or brokerage platform). These fees might cost anywhere from INR 100 to INR 750.
  • Taxes – You pay the government a percentage of your investment profits as taxes. When it comes to stocks, you pay long-term capital gains tax of 10% if you keep them for more than a year, and short-term capital gains tax of 15% if you hold them for less than a year. Both of these tax rates fluctuate dependent on the government’s levy of a cess or surcharge.

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