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How do you get started investing in the equity markets?

Dec 06, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

While trading may seem like daunting at the start, it is important to understand for first-time investors about how to go navigating this fairly-complex market.

Trading on the equity markets is perhaps one of the most lucrative ways to invest your money, as you have complete control over your investment portfolio and you can alter it to take advantage of the ups and downs of the market. An equity market, also known as the stock market is where buyers and sellers come together to issue and trade shares, which can be either those that have been listed on the stock exchange (public) or privately traded stocks. Stocks in India are traded on the Bombay Stock Exchange or the National Stock Exchange and while these are one of the most used modes of investment, starting out investing in such markets can be daunting. Here are some of the steps you must follow if you want to get started on investing in equity markets.

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Step 1: Get a PAN card

In order to embark on your investment journey, the first step would be to obtain your Permanent Account Number (PAN) if you do not already have one. This is a 10-digit unique number assigned by the Tax Authority of India and is required to open a bank account, invest in mutual funds, and file tax returns.

Step 2: Get a broker

The next step is to get a broker. While you are in charge of your portfolio and can take all your investment decisions, you cannot directly buy and sell shares in the stock market. This is when brokers in the form of individuals, companies and agencies come in the picture who are authorised by the Securities and Exchanges Board of India (SEBI), the market regulator to buy and see shares on your behalf. It is important to ensure that your broker is registered with SEBI and you have clear communication with them. In fact, you have the option of online broking, with several companies offering such services on the web.

Step 3: Get a demat account

After you have obtained a broker, the next step is to open your demat (dematerialised) and trading account which acts as your investment account.  Along with your PAN card, you will also be required to now obtain a six-month bank statement as well as a cancelled cheque to open a demat account. Such accounts show all the stocks and shares you hold as these are all financial assets which cannot be stored in a physical location any longer. All the buying and selling done on your behalf by your broker will reflect in this account. Additionally, the actual buying and selling of your shares will be done via a trading account, which is usually set up by your broker. Both these accounts are set up in conjunction with each other as having one is inoperable without the other.

Step 4: (Optional) Get a UIN

This step is optional for investors who want to make trades for more than Rs 1,00,000 at a time. If you plan to make such large investments in the share market, you will need a UIN or Unique Identification Number.

Credit: Deccan Chronicle

Step 5: Understanding the market

The next and perhaps the most important step of investing is to understand the market. In India, buying and selling of stocks is done on the National Stock Exchange and the Bombay Stock Exchange. While buying and selling shares, you have to tell your broker about which share you want to buy/sell at what quantity and what exchange. Even in case of online brokers, if you do not have access to the internet you can contact a customer service helpline to make trades. Transactions on your behalf are processed only once the share reaches that price, and such orders usually are only valid for a day or two. If for some reason your share doesn’t reach the order value, your order is cancelled.

Step 6: Happy investing

Starting out your investment journey can be exciting and nerve wracking at the same time, however, it is important to set your financial goals before embarking on your journey and do due diligence about the market. A diversified portfolio is considered to be the best, and for first-time investors it is advised to not take unnecessary risks.

However, investing in directly in equity markets is not for everyone. It requires a lot of time to research and monitor your investments. You can receive exposure to equity markets via investing in a Unit Linked Insurance Plan (ULIP) such as the iMaximize Plan by Aegon Life. The plan has no allocation charges, ensuring you do not lose your capital to frivolous fees. It comes with a protection element in case of death and allows you to choose from as many as 6 different funds to invest your funds in. It also allows you to switch between those funds, giving you the ability to pick one that matches your needs the best. Know about the different indian government schemes for women here.

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