Getting started is the most difficult part.
This is a practical guide to get started, no bullshit let’s get straight to the point.
Stock market/Share market/ Equity market: It is the place where ownership of a company is sold and bought. What we buy/sell is share of the company. Share is the unit of ownership. If you buy 1000 shares of reliance, you have approx 0.0000000322% ownership of reliance.
Most important market: (Think of this as eBay, company shares are listed and traded here)
- BSE: Bombay stock exchange. The oldest, with more than 5000 companies listed in this exchange. They use an index called “SENSEX”, which shows avg performance of 30 top stocks. Which reflect overall market status.
- NSE: National stock exchange. The relatively new kid(1992), a total of 1600 companies listed in this exchange. They use an index called “NIFTY”, which shows avg performance of 50 top stocks.
Note: These exchanges are not govt owned. The company is ruled by the board of directors. Works under the direction of SEBI(Securities and Exchange Board of India) this govt entity lays the rules and regulations.
All big players are listed in both BSE and NSE, so it doesn't matter much.
How do I buy stocks?
You need a broker to connect you and the stock exchange. The stocks you buy are kept in something called “Demat account”. As a bank account keep money, your Demat account keeps stocks you own.
There is plenty of brokers to choose from. Even many banks provide a trading facility. Most popular and one which I have personally used are.
1. Zerodha: Started in 2010, the broker with the most number of clients.
2. Upstox: Started in 2011 as RKSV, rebranded into the name upstox in 2016, with series A funding from Ratan Tata.
Brokers charge broker fees for every transaction(10rs-20rs) and annual Maintainance fee(300rs–400rs). To get started visit there site, sign up as you do for Gmail. Provide all the details including pan card, aadhar etc.
They do online eKYC so if you sign up today, you can get an approved account in a 3–4 days.
The brokerage provides you with both Demat account and trading account. Trading account is like a wallet, where you load up money before buying.
Next most sought out investment would be a mutual fund. Let’s set that up too.
What is a mutual fund?
It’s a pool of fund managed by professionals. Directly investing in the stock market is very risky (obviously a layman knows no shit about stocks).
So in a mutual fund, a fund manager uses the money we invest into the fund to buy stocks or any other financial instrument.
The basic advantage you get from mutual fund compared to direct stock is diversification.
Let’s say you buy “Indian Oil Corporation Limited” stocks for 1lac.
And soon oil prices burst, and you see ur money bleed.
But if you had put the 1lac in a mutual fund, they would invest some in Oil, some in telecom, some in the automobile (Depending on the scheme, you should view in which all stock/security a mutual fund deposits its money)
Downside — lower the risk lower the returns!
There are different types of mutual funds. On the basis of what they invest in and their goals.
How do I buy a mutual fund?
Again we have tons of options. Currently, the most famous ones are those which don’t charge a brokerage fee. (You can use Zerodha and upstox also to buy mutual funds). But you don't need Demat account or trading account to invest in a mutual fund.
Download the app, sign up (eKYC) . Then you are ready to buy.
Select the mutual fund you're interested in then, Click on invest now, then pay directly from a bank account as you would do from any normal shopping site.
Now the big question of what to invest in?
Now that’s a whole new story. Corona happened and the world is on a roller coaster ride. Stocks are going up and down. And the recession is inevitable.
Billions are lost, but billions are also made by smart investors during a recession!