The huge bull run that followed the 2020 crash helped investors make a fortune in the stock market. Many investors who invested during the crash or held onto their stocks saw their investments’ value double. Some experienced investors were even able to triple their money. The bull market did not only help people generate lucrative returns but also attracted many new investors to the market. Many people who had never invested in the market started to jump abroad.
Has becoming an investor in the stock market piqued your interests as well? If the answer is yes, it will surely benefit you if you know the basic requirements to invest in the stock market. You can bifurcate these requirements into two types of core requirements. The first requirement constitutes hare thaving the essential tools that let you invest in the markets. Your Demat account and online trading account ose essential tools. And the second basic requirement requires you to have basic knowledge about investing.
Your Demat And Trading Account – Your Essential Tools
To start investing in the shares of various companies, you must have a Demat account and a trading account. That is because your Demat account holds your shares in the dematerialized or electronic format. You can think of a Demat account like a savings account, but for shares. When You buy shares, they get credited to your Demat account; when you sell shares, they get debited from your account. Your Demat account keeps your shares secure and integral for the functioning of the online trading system. However, your Demat account only holds your shares. To buy and sell shares online, you must have a trading account.
You can open both a Demat account and a trading account by visiting the website of a DP or depository participant. A DP is an authorized stockbroker allowed to provide Demat account services. Most DP lets you open both accounts at the same time, in one go. The Demat account online opening process requires you to fill out an online form and submit a few important documents. The authorities ask for documents like your PAN card, Aadhar card, and passport as identity and address proof documents. Besides this, you are also required to provide your bank details to seamlessly transfer funds from your bank account to your Demat account. The charges involved with opening and using a Demat account include the account opening fee, account maintenance fee, and brokerage.
Using Your Demat and Trading Account
Now, you know that your trading account lets you buy and sell shares while your Demat account holds those shares. However, you use those accounts by interacting with the DP’s trading platform or trading app. In your trading app, you can search for the shares of different companies, place your orders, track the market and monitor your investment portfolio. You can also access price charts and a number of other beneficial features on the trading platform. However, some DPs offer more beneficial features than other DPs.
Basic Knowledge You Should Possess as an Investor
You cannot invest in any share when you open your Demat and online trading accounts. It would be best if you aimed to invest only in fundamentally strong companies with strong balance sheets. You should consider investing in a company only if the business is generating consistent profits and only if it has a clear growth trajectory. But at the same time, you need to ensure that you do not invest in overvalued stocks. There are several valuation ratios to help you segregate overvalued stocks.
So, to pick out the right stocks, you have at least some stock-picking knowledge, and you should know basic fundamental analysis. The process of investing is not over here. You also need to have a basic understanding of how the stock market functions. The market cannot make continuous all-time highs. Neither can it trend down forever. There will be ups and downs, and there will be volatility. When the markets are volatile, your fundamental stock analysis will help you stay invested.
Some stock market terms may sound like complicated jargons, but as you do some homework, you will gradually get acquainted with those terms. The features and services provided by your DP can help with fundamental analysis and tracking the markets. For instance, IIFL Securities offers company research reports and stock ideas to its users to assist its users with stock selection. The Demat account online opening process is also free to encourage more people to start investing.
To summarise, before onves, you should know what tools you need to invest, how to get those tools, and how to identify good stocks.