The modern economy allows an individual to turn himself into an investor without much difficulty. Investments help people to realize their long-term goals by accumulating fortunes for them over a course of period. If you are aspiring to be an investor yourself, it is time for you to understand how to buy your first stock and engage in the world of investments.
The first thing to know about stocks is that they can be purchased or sold only through a Demat Account. Demat Account is an online platform allowing you to hold your investments in a digital form. The word Demat comes from dematerialization which means converting physical or material shares into de-material or electronic form. The Demat Account meaning stands for. So the first thing you have to do is to understand how to open Demat Account.
How To Open Demat Account
The answer to how to open Demat Account lies in the following steps:
- The first step relating to how to open Demat Account implies choosing a Depository Participant (DP). A DP is an intermediary who acts as an agent between the investor and depository thereby facilitating transactions between the two and providing other services to the investor.
- Once you have chosen a DP for yourself, you will be required to submit documents providing address proof, income proof, and identity proof.
- The next step of how to open Demat Account includes filling up a Dematerialization Request Form (DRF). This form will be sent by your DP to the depository.
- Once the DRF is verified and approved, your Demat Account will be opened in a matter of a month.
These simple steps will therefore resolve the question of how to open Demat Account. Once the Demat Account opening has been done, you can start trading and investing in shares.
Look For Stocks
The next thing for you after opening a Demat Account is to look for companies whose stocks you want to buy. Since you are new to this, your DP might come off as a great help to you. Also, you can access the share market prices of various companies’ shares and look for the ones you think are the best for you. There are many companies that sell shares at a very low price and though many shares can be bought with an affordable amount, it is not advisable to just keep buying the shares which are priced low. You should take a look at the history of the company and its performance: whether it holds any positive chances for performing better in the future. Buying many shares and their not providing sufficient returns, if not loss, will only be a loss of money.
Finding the shares compatible with an investor’s financial needs is a crucial step towards entering in investment.
The Number Of Stocks
Once you have understood how to open Demat Account and how to buy stocks the next step is to decide how many stocks you would buy. This is a very subjective option. The number of shares you would want to buy would depend on your income and goals. Always go for investment only when you are able to meet your present expenses completely. If you are saving enough for investment another factor that comes into play is your ambition. What are your plans for the future should coincide with the risks you are in the capacity of taking.
Stock Order Type
Generally, investors have met with great success by investing in these two types of stocks:
- Market Orders
- Limit Orders
Market orders are buying or selling of stocks at the best current price. Since the value of stocks in the share market is constantly fluctuating, it might be the case that the value at which you bought the orders is not corresponding to the value you looked for in the market. The price one bids for and one pays is constantly fluctuating. Market orders are, therefore, best for investing in those stocks where prices do not fluctuate a great deal.
In limit orders, stocks are bought or sold for a price on which an investor has better control. What this implies is that if you set a limit of Rs. 90 on a single unit of share whose market price at present is Rs.100, then your broker or DP will ensure that the share to be immediately bought at the time when its price falls to Rs. 90. The same implies to the selling of shares: they will be sold only when the share price rises to the specified valuation. Limit orders are excellent for buying shares of small companies and where a variation in price is expected.
With these points in mind, you will be able to buy stocks for yourself. Having understood the Demat Account meaning, how to open Demat Account, and the steps involved in buying the shares, you will not only get yourself your first stock but also understand a lot about the share market and how it works.