Most individuals understand that they cannot see the desired growth of their funds in their bank accounts. Savings in your bank account fall short of overcoming the impact of inflation. Therefore, to negate the impact of inflation, individuals look out for investment options that are easy and safe. One such avenue is stock market investments.
The stock market offers significant returns to investors by harnessing the power of growing companies. Investing in stocks can be a great way to build wealth with prudent decisions. Stock market investments are safe under the legal frameworks through SEBI and stock exchanges.
Let us elaborate on the easy and safe process of investing your money in the stock market.
Demat and Trading Accounts
Demat and trading accounts have simplified stock market investors’ investing and trading process. These two accounts bring more transparency to trade orders and transactions made in the stock market through stock exchanges.
● The Working System of Online Demat Account
A demat account is the first mandatory account to invest in the stock market as it holds your dematerialised securities for further trading. It is an online repository for numerous securities in the dematerialised form in the stock market like shares, corporate bonds, government bonds, commodities, currencies, mutual fund units, futures and options. The primary function of a demat account is to keep the financial securities you have invested in safe and secured online. It facilitates investors in many ways:
- Fast transfer of shares.
- The facility of changing the form of securities – Dematerialisation or rematerialisation.
- Track or monitor all your securities in one account.
- Get a loan against your demat securities.
- Automatic credit of benefits arising out of corporate actions – bonus/split/consolidation/merger, etc. Receive dividends, splits, rights, bonuses issues, refunds, etc., directly in your account.
● The Working System of the Trading Account
A trading account allows investors to transact to buy/sell securities electronically. No trading account means no access to the stock exchange and trade execution in the market. Using your trading account, you can log in to the trading platform provided by the stockbroker.
- Your trading account connects your bank account to fund your trades and receive the booked profits. All securities you buy in the stock market can be kept securely digitally in your demat account.
- Leading stockbrokers invest enough to offer advanced trading platforms to active traders in the stock market. It is the primary account of intraday traders as they need to place orders frequently. With an advanced online trading platform, day traders can place trades quickly as soon as they find a favorable position.
Determine How Much You Can Invest
The power of compounding is the key to building wealth in the stock market over time. For that, you need to check your budget to invest regularly. You can start stock investing with very little money. You can trade even a single stock.
How much you should invest depends entirely on your budget and investment horizon. Investors want to invest whatever they can afford to lose. Experts suggest keeping your capital invested in the stocks for the long term – at least three years, ideally five or more. It is necessary to maximize your returns. Long-term investments can help you to ride out market fluctuations comfortably. Therefore invest that you can commit for the long-term.
If you cannot leave your funds invested for at least three years without touching them and want to trade securities for short-term profits, you can consider building an emergency fund first. It will help you to ride out any fluctuations in stock prices.
Best Stocks for Beginners
Novices in the market must keep things simple and later expand as per their skills development in online trading. Investors can consider fundamentally strong companies to start investing with a long-term goal. It will reduce the risk involved in direct stock investing. Otherwise, you can consider mutual funds that are managed by professionals to help investors in meeting their investing goals.
Closing Statement
Now you know how to start investing in an easy and safe process. You can invest in many ways on your terms in the stock market, per your skills and investing goals. If you need guidance from industry experts, look for well-established and reputed brokerage firms. They will help you to choose the investing style for online trading – actively or passively, as per your requirement. Open your demat and trading account and invest in the stock market investments that work for you best and build your wealth.
