Share market for beginners can be really tricky. You may think you know it sufficiently well but it can surprise you quite easily. This is due to the fluctuations and volatility that the market faces every day. So what is to be done here? While much of the share market for beginners will remain a complex mechanism it will nonetheless help you to know briefly about investment in the share market.
A beginners guide would be a good place to start with. In order to understand the share market, we first have to look at what is meant by shares. A share is a per-unit value of a company’s capital. A company looking to bring up capital issues shares that divide the capital equally. The place where shares are bought and sold is called the share market. It is the place where different companies and investors come together where the former offers the shares the latter the investment amount.
While the share market for beginners gets a bit confusing, a Demat Account helps a great deal in understanding much of what goes on in the share market. The Demat Account is like a savings bank account where instead of money your shares and equities are stored in the digital format. The Demat Account uses the concept of dematerialization which is used to convert the physical share certificates into digital or electronic forms.
You can access the Demat Account on your computer or phone to keep track of the performance of your shares.
The Demat Account not only helps you in preserving your shares better but also gives you sufficient information regarding the activities of the share market.
It is important to have a Demat Account prior to investing in the stock market for shares.
The trading account is used to trade stocks in the share market. In order to purchase or sell shares in the share market, you need to have a trading account. The trading account is linked to your bank account to facilitate the buying and selling of shares. Although the Demat Account is mandatory it does not offer the benefit of trading in the stock market. For that, only a trading account can serve you. The trading account cannot be used to store your purchased shares. For that, the Demat Account will be needed.
To make simple the working of the share market for beginners, a Demat Account is like a savings account while the trading account resembles a current account.
For investing in the primary share market, you will be needing an IPO. For doing so, both Demat and trading accounts are required. With the help of both of these accounts, you can also apply online. Depending on the market conditions, a specific proportion of shares will be allotted in your name. As soon as all the IPO applications are received the shares are distributed to the potential candidates on the basis of availability and demand.
The secondary share market refers to what most people mean by the actual stock market. This is where the investors and sellers meet directly for the requisite transactions. The secondary share market for beginners is a slightly more complex process than the primary share market. In order to understand the working of the secondary share market follows the given process:
- Open your Demat and trading account.
- Log into your trading account
- Select the shares you wish to buy or sell.
- Decide on the price at which you wish to sell or buy the share and enter the said amount.
- Now you will have to wait for a buyer or seller who agrees on your terms.
- Once you have found one, the transaction can take place.
With this simplified step-by-step process investing in the share market for beginners can be really easy.
There are certain key points which a beginner should always keep in mind regarding the share market.
- The share market keeps fluctuating on the basis of the number of buyers and sellers. When there are more buyers than sellers than the market seems to be on the rise. But when the sellers exceed the buyers, the market goes downhill.
- Stock value and price are not the same things. A company with a stock of Rs 100 can have more value than the one with Rs 200. Price to earnings and net assets play key roles in determining the value of a stock.
- The dividends a company provides do not necessarily have to be in the form of money. They may also offer you more shares in the form of dividends.
- Penny stocks are priced quite low. This is where the share market for the beginner can be really tricky. Buying a large number of penny stocks for their low price will not be a smart decision as these stocks belong to the company that is performing poorly or is in immediate need of capital.
By keeping these things in mind you can avoid taking the wrong steps in the share market. Also, remember that if you are going for investment in shares it is better to give the shares the time to grow. Impatience is not the best response in the share market.