The last twenty years have perceived perpetual progress in the popularity of share or stock market investing. Regardless, the market’s instability remains an area of scepticism. But the huge returns on stocks are enough of a reason for people to keep continuing to want to invest in the share market. In fact, in today’s time, it is considered to be one of the most effective and easy ways of making money.
What is the Stock Market?
The share or stock market is an arena for trades, enabling investors or businesses to list, purchase or sell various securities such as products, contracts, mutual funds, capital, etc. Mainly, it comprises varied stock trades, either conventional or OTC over-the-counter, that stimulate such bargains with the listing of financial instruments.
The stock market functions are primarily managed and monitored by governing authorities such as the Securities and Exchange Board of India. Understanding these functions is vital to comprehending how to learn stock market trading. Many people even consider the stock market to be the best option to invest your fortune if you expect to earn significant returns. Also, there are several categories of stocks or shares that you can purchase, such as mid-cap stocks, small-cap stocks, and large-cap stocks.
Why should you invest in the stock market?
There are several reasons you should invest in the stock market. Here are some of them.
- Ownership stake in companies
Financing in a share or stock practically insinuates investing in a business or company. This is mainly because acquiring stocks of a company buys investors a title stake in the company, therefore giving them an insight of ownership in the business and the chance of contributing towards the marketing and other decisions.
- Wealth generation
Stock market purchases hold the potential to produce substantial profits in the long run. Figures indicate that share markets have nearly always survived the trial of time and have soared in value over the past few years, providing investors with a chance of getting good returns on their investments.
- Seamless trading
Share market trading nowadays is not a complicated task, with the presence of an abundance of online platforms in the form of apps and websites providing trading facilities to investors across the entire country.
- Flexibility to modify investment quantity
Another advantage of investing in the stock market is that even investors new to the world of trading and investing in the share or stock market can start with minor quantities allocated to the market. Purchasing mid-cap or large-cap stocks in minor amounts can also assist in restricting the risk.
- Regular income through dividends
Many companies might distribute their earnings to stakeholders by means of interest. This functions as a supplementary earnings spurt for investors, particularly in circumstances where the stock value has recently dropped.
Eligibility for investing in the stock market.
Budding investors who want to start investing in the share market need to fulfil the following requirements.
- Certified documents
The investor should have the following personal documents
- PAN Card
- Aadhaar Card
- The name of the investor on a declined cheque from their active bank account.
- Evidence of residence established on a record of papers that have been approved by their depository party, bank, or stock broker
- Statements of their account
- Passport-size photographs
- Demat Account
A dematerialized or Demat account is an account that facilitates investors to hold their monetary securities in an electronic setup—a Demat account functions as an electronic store for your stocks. Creating a Demat account is a simple procedure executed offline or online with the assistance of a depository party. Several banks also provide Demat account services to enlisted investors.
- Trading Account
As trading enthusiasts say, a Demat account and a trading account are like two peas in a pod. A trading account is utilised to purchase and market securities that the investors want to trade in the share market. Trading and Demat accounts are necessary for financing in the stock market.
The NSE or National Stock Exchange, and the BSE or Bombay Stock Exchange, are central exchanges in our country where the stocks are recorded. But, some stocks might only be accessible on either one of the two platforms. Therefore, it is better if the investors create their trading account with a depository party that extends trading on both NSE and BSE.
- Linked Bank Account
The linking of a bank account to the investor’s trading account assures a smooth flow of cash in and out of their account as they continue to trade. This is also made mandatory by maximum brokers nowadays, with the investors might select creating a trading and Demat account.