Investing in the Primary Market
The primary share market is accessed by an Initial Public Offering (IPO). When a firm gets all the investor applications for an IPO, the applications are tallied, and shares are assigned based on demand and availability. To invest in both the primary and secondary markets, you must first open a Demat account, which stores electronic copies of your shares. A share market trading account is also necessary for purchasing and selling shares online. Depending on the circumstances, a trader may be able to submit an application directly from their bank account. An application for an IPO that is submitted via net banking is made much easier by a process known as ASBA.
According to the ASBA procedure, if a person applies for shares worth Rs 1 lakh, the funds would be stopped in their bank account rather than being given to the firm. When you get your share allocation, the correct amount will be charged, and the balance will be released.
Investing in the Secondary Market
A few straightforward steps need to be taken before you can start investing in the secondary share market.
Step 1: Establish a Demat and trading account: This is the beginning point for secondary market investing. Both of these accounts should be connected to an existing bank account for a smooth transaction.
Step 2: Share selection: Log in to your share market trading account and choose the stocks you want to sell or acquire. Ascertain that you have the necessary cash in your account to acquire those shares.
Step 3: Decide on a pricing target: Decide if you wish to purchase or sell a share. Wait for the buyer or seller to accept your request.
Step 4: Finish the transaction: When the transaction is completed, you will get either shares or money for the stocks you acquired or sold. Make a note of how long you want to stay involved and what financial objectives you hope to attain with your investments.
Things To Consider Before Investing
Although stock trading is not as tough as it seems, it is easy to get engrossed in the world of trading without being rewarded in the long run. So before investing, keep the following considerations in mind to avoid this outcome:
- Recognise Your Investor Profile: Your investment profile might disclose which products best suit your risk tolerance. This helps you to verify that you are taking on the appropriate level of risk for your lifestyle.
- Make Your Portfolio More Diverse: A good portfolio is varied. If one asset class dominates your portfolio, it will not provide a consistent cash flow while that instrument is experiencing a downturn. Financial gurus advise adding various asset classes to counter the poor times of one asset class. For example, the stock is often countered by investments in bonds or other debt instruments. This balance in a portfolio helps protect against a market downturn.
Wrapping Up
Certain crucial concerns should be considered while investing in the stock market. These include evaluating your risk tolerance, planning your investments and ensuring your diverse portfolio. If you're having trouble choosing the proper shares, planning your investments, and setting objectives based on your risk tolerance, reach out at Motilal Oswal and take advantage of our stock advice services right now!
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