Simple answer may go like this: open a Demat and trading account with a broker, transfer money to the account, take demo/tutorial from your broker and start trading and investing in stock market. But the whole thing is not that simple.
The foremost job is that you learn continuously about the market as much as you can.
- Read books like ‘Rich Dad Poor Dad’ by Robert T. Kiyosaki,
- The Intelligent Investor by Benjamin Graham,
- Essays and Books of Warren Buffet, etc.
- Other books: 9 books billionaire Warren Buffett thinks everyone should read
- You can read other sources of investment knowledge like blogs of successful and failed investors, financial magazines, experienced people in the field and other resources available on internet, etc. It will help you prepare yourself psychologically and strategically which is very important while trading and investing in stock market.
- The more you read, the more you learn, the more you earn.
Then you have to open a Demat account with such a broker who charges you low, have technologically advanced trading platforms, good customer services and no hidden charges.
There are a number of brokers who provide Demat account opening facility. In India, one has to go to a broker for this because the only two Depositories of India, CDSL and NSDL extend their depository services through Brokers who are called Depository Participants (DP). These DPs or brokers provide you Demat services and platforms for trading and investing i.e. buying and selling stocks, Mutual Funds and other products and they charge you for all your transactions. So, find a broker who offer you quality services and charges low for all these services.
1. To enter the stock market and invest in stocks, you need
- Demat account to take delivery of stocks.
- Trading account for equity and currency derivatives.
- Commodity account to trade commodity futures on MCX.
Necessary documents for opening these accounts:
- PAN card
- Address proof (any one): Land line telephone bills, Electricity bills, bank statements etc., attested copy of Passport/Driver’s License/AADHAR Card.
- Bank Account detail: Cancelled cheque with Name, IFSC, MICR printed on it.
- Income proof (for F&O only): Any one -Form-16, IT acknowledgement copy, 6-month Bank statement (will also act as an address proof), Stock Holding Statement or the CA certifying your networth.
- Passport size photos
2. When your account is ready, you can request for demo/s from your broker to understand the order placing system and other facilities. You can add stocks and start following their movements and make your own strategy to select and follow and place your order.
3. You can transfer fund from your bank account to your trading account and start trading cautiously. You can start with Blue chip stocks which are unlikely to collapse or solid enough to bear/recover a crash in the market, if any.
4. Investing in Mutual Funds may be good for you as a beginner. It may help you track movement of stocks sector wise initially and at the same time risk factor will not be bothering much.
It is good to have an expert (Distributor) to manage your MF investments but you have to pay charges for the service resulting into reduction of your return. After enrolment of GST the service charge is likely to go up by 3% (15% to 18%) which means you have to spend more from 01.07.2017.
In the stock market, the more you learn, the more you earn and Intelligence and Patience are the key factors for success as an investor.
5. With time and experience you will gain confidence and excel in your research. During this period, you will learn very fast. You will collect/access materials to satisfy your knowledge to be a successful investor.
One little suggestion:
As a beginner, you may go for discount brokers for opening a Demat account. Zerodha may be suitable for you as they are the most cost efficient and provides you good platforms and services.
- They charge you Rs 0 (Zero) for delivery and 0.01% or Rs 20/- whichever is lower per executed order for intraday trades across equity, commodity, currency on BSE, NSE and MCX.
- One can trade and invest through their technologically advanced platforms Pi for desktop and Kite for web/iOS/android with advanced options like bracket order, cover order, trailing stoploss, charts, etc.
- A beginner can follow trading behavior of successful traders; get realtime details and notification of their trades by subscribing Open Trade. It can help you grow your own research skill and strategy.
- As they don’t provide research call or tips for trading/investing, they have platforms for education of their clients.
- Varsity: You can learn Basics, Fundamental & Technical Analysis, Risk Management, Trading Psychology and Taxation.
- Trading QnA: On this interactive platform, a client can ask all your questions and reply will come from experts and even the CEO.
- Z-connect: For info and update.
- Pulse: Market update.
- As a beginner, you may step in cautiously by investing in Mutual Fund. Zerodha have a platform called Coin that lets you buy mutual funds online directly from asset management companies/fund houses and completely commission free. It’s good for you if you wish to go for recurring investment. They charge you Nil for investment upto Rs 25,000/- and for any amount more than 25k you have to pay flat Rs 50/-per month. This is very cost effective for an investor. By investing through Coin, you get facility of
- Choose your MF from the 2000 odd alternatives
- Purchase directly from Asset Management Companies/Fund Houses
- No upfront & trail commissions (one has to pay if purchased from a distributors)
- Keep in your Demat maintained by CDSL securely
- Since MFs are in Demat one can pledge and take loan in emergency
- Keep all investments in equity, currency, MFs at a single place
- Easy SIP, start, modify and stop as and when you think
- Track NAV, purchase and redeem funds as per NAV
- Watch Profit & Loss
- Get Single capital gain statement; Easy for taxation
- Easy Nomination procedure
Zerodha charges Rs 500/- [Rs 300/- for Demat & Equity and Rs 200/- for Commodity] for opening account.
- Those who have already a Demat account or invested in MFs, openong account with Zerodha is very easy as they are KYC compliant. They can do it instantly with Aadhar: Click here for Opening account online with Aadhar
- Others may also go for online account with Aadhar: Click here to go to their account opening page directly.