Wondering how to buy shares? This handy guide will help you on your journey towards learning how to buy shares online and start your trading journey in the Indian stock market.
The first thing that you must do is decide where you should purchase stocks. Choices are aplenty so be careful about what you choose. Many people prefer investing in stocks via stockbrokers or brokerage firms. Some prefer purchasing them directly from public limited companies/entities. Some may also invest offline through their financial institutions or financial advisors. Yet, the easiest method is definitely online stock purchases.
You can easily buy stocks or shares online without any hassles whatsoever. There are numerous mobile trading apps and online platforms which help you create accounts and set them up for trading. The decision is up to you; You can either invest offline with the help of a broker or choose the online method, i.e via app or web. Investment platforms like Groww have been really helpful for investors to take the online path and invest seamlessly. When it comes to opening a trading and Demat account, these stock trading apps make that process also least intricate.
All you need to do is e-sign with your Aadhaar number. Once you have unlocked stocks, you will be required to enter your Aadhaar number and input the OTP received on the mobile number linked to your Aadhaar and you are good to go!
You can start buying stocks thereafter in a few minutes itself. An online account requires about the same time and effort as setting up a bank account these days and does not come with any major hassles. The application has to be completed by you along with providing identification proof and you have to decide how to fund this account, either via electronic transfer from your bank account (linking your bank account) or any other method.
Some other key steps on how to buy Indian stocks
When it comes to knowledge of stock, how to buy, what you should do to set up the demat account are at the outset. This is the account that is used for holding shares when you buy them and will be credited accordingly. Whenever you sell shares, it will be debited likewise. The account is linked to your trading account online. It functions as a bank account for stocks, only there is no interest or anything like that (we certainly wish there was!). The next step is choosing the stocks/shares that you wish to purchase. This is a vital step in the whole process and will determine the success of your investment by a great deal. It requires quite a bit of homework and research on your part.
When it comes to successfully identifying the right stocks in the share market, you should do your research on companies who are doing well in the market and have time-tested track records of success or solid reputations. Look for companies that can reap you rich returns in the future and do not fall for any sudden hype or hoopla. Look for companies where you want to hold part ownership. That should be the simple investment philosophy to be followed. Even legends like Warren Buffet remain clear about this, i.e. buying stocks due to a sense of ownership or desire to buy the same without looking for returns.
A few things that you should start off with include the annual report and credentials of the company, the annual shareholders’ letter from the management and the business numbers and general narrative. Thereafter, you will find several tools, insights and analytical help from your online brokerage or investment platform. Use these to come up with the right decision. Some other factors that may need to be evaluated include SEC filings, quarterly updates on earnings, transcripts of conference calls, and even the latest company news. There are tutorials available on trading online along with seminars and other digital knowledge-gathering initiatives that you can check out as well.
Decide on the amount of shares that you wish to purchase
The third step, once you have completed the above mentioned procedures, is choosing the share amount, i.e. how many shares/stocks that you wish to purchase. Do not feel pressurized or compelled to buy a specific number of shares in a company or fill up your whole portfolio by buying higher shares of a single stock. Start out small and buy one or two units to get a feel of the process and assess your own risk appetite to tide over market fluctuations. Keep adding to your stock position over a sustained time period.
You should not lose focus on your investment strategy if there are bad cycles in the market to go through. The key aspect here is staying invested and remaining steady. While you cannot control fluctuations and market movements, you can always optimize your portfolio through reshuffling at regular intervals, based on the latest trends. You can always get the right analytical tools and information sources at your fingertips while factoring in additional costs like commissions or brokerage charges. Additionally, you can consider mutual fund investments since they enable purchases of multiple stocks through single transactions, while delivering steady returns in the future.
Consider the type of order you place for stocks
The purchase process concludes with the specific order that you give for buying stocks/shares. You should know some key aspects about the same before investing:
- Market orders are those for buying at the present market prices. These cover instructions for selling/buying securities instantly at present prices prevailing in the market. However, the price of execution of the order may not always be at the last-traded amount. Market orders will usually happen at or in proximity to the present ask/bid price. Commission rates are lower for these orders.
- Limit orders are those with specific limits on prices for market orders- The emphasis in this type remains on limits regarding prices. Orders for buying a security at a maximum pre-set price can be issued. They will also cover selling at a minimum pre-set price threshold as well. Commissions can be decent here and you should keep them in mind. However, an advantage is that you do not have to perennially keep tracking the stock market and its trends every moment.
- Condition based market orders- There are several types of market orders which come with conditions. These include stop/stop loss orders for selling/buying stocks whenever any specific price threshold is touched. Upon reaching this price limit, the order will transform into a market order. The price where the order is set, is called the stop price. The key objective here is safeguarding gains and restricting losses. Buy-stop and sell-stop are the two types of orders. The former happens at prices higher than present market prices while the latter happens at prices lower than present market prices.
- Stop Limit Orders- These orders are where the execution price remains absolutely fixed and unchanged.
- Trailing stop loss order- The key aspect here is the change in percentage or absolute fall/rise in asset prices. The orders safeguard gains made by traders along with reducing overall losses.
Some other types of orders including trailing stop limit orders, goods-till-date orders, cover orders, market and limit orders based on the time period, one cancels the other orders, good-till-cancelled order, fill or kill order, immediate/cancel order, at the opening order, all or none order, at the close order, order sends order, intraday square-off orders and iceberg orders. You should be familiar with the order types since it will determine how you purchase your shares.