Investing is a way of life. From daily wage employees to high-powered executives, almost every person set aside a portion of their income. This money that they set aside is used to invest in various financial instruments. That is done hoping that the money grows over time and that they receive good returns in the future.
There is a basket of investments to choose from these days. Whether it is a few lakhs or a few thousand rupees, if you have money set aside, you can find the right sort of investment for the money you have.
Once you decide your risk appetite, investment goals, and the kind of returns you expect, you can quickly start investing. You can even pay others like investment managers, who will use your money to invest in financial securities that best benefit your interests.
Investing in stocks
A stock represents ownership of the company. It shows the interest an investor has towards a particular company. Once an investor buys a company’s stock, they own a part of a company and become shareholders of that company. As shareholders, investors have the right to share profits or dividends that the company earns until they own the stock. They also have voting rights.
The share market is a vast ocean full of opportunities. The place where buyers and sellers trade in shares is called the share market or the stock market. They only trade in companies that are eligible to be traded in the stock market.
Buyers quote the highest price that they are willing to pay for a stock of a particular company. That is called the bid price. Sellers quote the lowest price that they are ready to accept for the same stock. That is called the asking price.
In the earlier days, the share markets were full of chaos and confusion. Buyers and sellers traded using the open-outcry system. They all had to be physically present on the trading floor and either yell or use hand gestures or signal across to each other to execute their trades.
Added to this, the share certificates issued were all in paper format. It was cumbersome and led to instances of theft and forgery. Even though this system was followed for several years, traders found that this system sometimes led to manipulation in the pricing.
How does the stock market work?
Nowadays, the convenience of electronic trading has eradicated the disadvantages of open-outcry and paper certificates.In electronic trading, registered online stock brokers can act as agents to help you buy and sell shares.
In electronic trading/online trading, you need not be physically present on the stock exchange floor. All you need is an internet connection and an electronic device to work with. You can execute shares even on your mobile phone.
All you need is an online trading account, a dematerialization account (demat), and a bank account. Trading can be done at any time at your convenience and any place.
With the introduction of the demat account some twenty-five years ago, the disadvantages of the open-outcry method were removed. Paper certificates were converted into electronic format. All the details of shares and other securities traded are now stored online.
That is called a demat account. You now cannot trade in the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) without a trading account and a demat account.
A trading account is where you place the buy or sell orders for the shares you have traded. A trading account helps you buy and sell shares. When you start trading electronically, your account acts as the link between your demat account and your bank account.
You place the order for shares through the trading account. Once the orders are placed, the number of shares traded is stored electronically in your demat account, and the money is debited from your bank account.
Registered stockbrokers can act as you agent help you buy and sell shares. You can place orders for any shares, and the transaction will take place within a few seconds.
Investing in stocks is more complicated than just choosing a company to invest in. As a new investor, you need to know all the risks that you will have to face. Online brokers charge fees and brokerage for the service they render. Choosing a broker is as essential as selecting the stock that you are going to invest in.
You need to find a stockbroker who will provide you with extensive support. This support should not be just in choosing the suitable investment but also in all the small hurdles you might face trying to invest in the stock market.
ICICI Securities Ltd. ( I-Sec). The registered office of I-Sec is at ICICI Securities Ltd. – ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai – 400020, India, Tel No: 022 – 2288 2460, 022 – 2288 2470.
The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.
The contents herein above are solely for informational purposes and may not be used or considered as an offer document or solicitation of an offer to buy or sell or subscribe for securities or other financial instruments or any other product.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purposes.