Beinga beginner, it must be hard figuring out how you’re going to buy and sellshares online and make investments to build enough wealth for your retirement.Many retail investors have Demat accounts and yet unaware of the procedure ofbuying & selling shares. FYI, India is one of the fastest-growing wealthmanagement markets in the world with a history of more than 100 years and 7,000public listed companies. In addition to it, India has just become the 5thlargest economy in the world after defeating UK & France now on the path tobecome the 4th largest private wealth market globally by 2028. Thiswidening in capital markets will be the key factor in the economic developmentof the country. However, in terms of market capitalization, we are still waybehind compared to global standards. The participation of retail investors inIndian capital markets is significantly low and only near around 3% of theoverall population is invested in the stock market.
Keepingin view the importance of retail participation in capital markets, people mustbe taught with the DIY (Do-it-yourself) way of buying and selling shares in thestock market for the economic growth of the country. Achieving this won’t beeasy, but you gotta start somewhere. But before we proceed, let’s clear a fewthings:
Forinstance, when someone says, how to buy and sell shares online? There are twological meaning behind this question. First, a person is a complete beginner inthe stock market and is not familiar with the ways of buying and selling shares. Second, a person has a Demat accountand the financial knowledge needed to invest in the stock market but don’t knowhow to buy and sell shares to make the most out of his investments. In short,he is looking for stock market tips or tips to select the right stocks toinvest.
Therefore, we will take these both scenarios one-by-one.
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Thestock market is one of the most sought-after investment options for Indiansafter gold and real estate. Although the stock market is volatile, buyingshares can help you generate a lot of money. However, you must be willing tobear the high risk of investing in the stock market. In India, people arealways skeptical when it comes to investing in the stock market. Truth is, investments made inequitiescan allow you to generate higher profits than investments made in gold, silver,or any other financial instrument.
Besides,as we mentioned earlier, the capital markets are the key factor in the economicdevelopment of a country. Thus, you must learn your ways to buy and sell sharesonline via Demat account. Once you become an expert in that you can trydabbling in the market any way you want.
Here,we’re going to discuss the way of buying and selling shares for a beginner andenters the world of the stock market.
Thereare a series of steps that you need to follow to start buying and sellingshares which are as follow:
Step 01: Get yourPAN Card
Doyou have your PAN Card? – If not then you better get your PAN card. PAN Card isa ten-character alphanumeric permanent account number treated as an identifierand issued in the form of a card, by the Income Tax Department, India. If youplan to buy shares online then get this – You need a PAN card! Or better, tomake any financial transaction, you need a PAN card. And not just in case of investingin stocks but if you’ve decided to invest in mutual funds, FDs, PPFs, and RDsor want to open a bank account, you are going to need a PAN card for that too.
Step 02: Find aStockbroker
Onceyou get your PAN Card ready, it doesn’t mean you go straight to the exchange orcall directly in the company whose shares you wishes to buy. There are certainindividuals, online agencies, and companies who are authorized to buy and sellshares on the stock exchange in the primary market. They are often known byname – brokers. These stockbrokersare registered and licensed by domestic market regulator Securities &Exchange Board of India (SEBI). While working out as an intermediary betweenshare trader and exchange, the stockbrokers charge a commission in helpinginvestors buy and sell shares.
Whenselecting a stockbroker, it is important to take into account the broker’sbackground, the broker’s fee, the commission charged, and kind of services itis providing. You can choose from full-time traditional brokers to discountbrokers based on your needs.
Step 03: Open aDemat & Trading Account
Nowthat you’ve chosen the stockbroker, it is time to open a Demat and Tradingaccount to buy and sell shares in the stock market. There was a time when yousee people yelling orders on the floor of the exchange, but these days, one canbuy and sell shares online through a stockbroker. However, to do this, you willneed to open a Demat and Trading account with your stockbroker.
ADemat account is one where the owned shares reflected in your portfolio whilethe trading account is one which allows you to buy and sell shares or othersecurities in the market. The shares you buy and sell are in dematerializedform for online trading.
InIndia, the National Securities Depository Limited (NSDL) and Central SecuritiesDepository Limited (CDSL) are the depositories which allow investors to openDemat and trading accounts through brokerage firms. It is the depositoryparticipant that holds and releases the shares you purchase and sellrespectively.
Toopen a Demat and trading account, you need to decide on the depositories youwant to open your account with. Or you could just go with the broker, you wantto open your account with and then know your depository participant later.
Afterthis, you can fill the form for account opening and submit along with copies ofthe necessary documents required to open the Demat account with yourpassport-sized photograph. Once done, in-person verification would be carriedout and application will be processed on successful verification. Once done,you’ll be provided with an account number and client ID.
Step 04: Transfer Money in your Account
Nowthat you’ve opened your Demat and trading account, in order to buy sharesonline, you must transfer money in your account. You can transfer the money inyour account from bank account by different mediums like Credit/Debit Card,UPI, e-Wallet, PayPal or via bank transfer.
Ifyou’re planning to transfer more than 1 lakh rupees into your Demat Accountthen you need Unique Identification Number (UIN) to do the transaction.
If you’ve opened your Demat account and followed the above procedure that means you have decided to start investing. Now it’s time to take a dive in the stock market to find the stocks to invest in. Defining your goals is one way to select the right shares to buy. One should determine the purpose of making a portfolio. Beginner investors who are in this to buy and sell shares must focus on the overall income, expenses, and savings to ensure a consistent flow of capital for investment. Capital preservation is what beginners mostly concerned with and tend to invest in stocks of blue-chip companies for safety reasons who are recognized for their stable performance throughout the years.
However,the investors who are in for capital appreciation prefer to invest in small andmid-cap stocks. So, first decides on your goals and risk appetite. Do not letthe volatility cloud your judgment and start with industry that’s familiar toyou. Any beginner can become an informed investor if he/she keeps tabs on thecurrent market events, day-to-day happenings in the stock market, and corporateevents. To do so, one should read newspapers, use stock market web-platformsand apps, and news channels as these are simple forms of passive research.
Beinginformed will help you in further research and understand the fundamentalswhich drive a particular industry. A thorough analysis can help in picking theright stocks to buy. There are thousands of stocks in the stock market but withthorough fundamental analysis, you will be left with a handful of stocks. DON’TSWEAT!!! Because your painstaking research will come to fruition soon. Even ifnot, you will at least able to minimize the potential risk of losingcapital.
Tobetter understand how to do a fundamental analysis of stocks in the stockmarket you can see How to do a fundamental analysis of stocksin Indian stock market?
Step 06: Place your Buy Order
Ondeciding the stock, it is time to place your order. Decides on the number ofshares you want to buy to fill your portfolio with. Although it is all yourdecision as a beginner it would be recommendable to start small just to feelhow it looks like buying individual shares.
Whileyou’re at it, choose the order type – marketorder, limit order, stop-loss order or stop-limit order.
| Order Type | Description |
| Market order | It is the simplest of buy or sell orders which are to be executed at the current market prices. It allows investors or traders to buy at the available price. While placing the market order, sometimes the price you see at the time of buy or sell is not the exact price you pay. |
| Limit order | It is the buy or sells order which is to be executed to buy or sell the shares at the specific price or better price in either direction. Investors or traders have control over the price while placing the limit order. However, the order itself cannot be executed if the underlying security does not come to the set price. |
| Stop-loss order | It is a buy or sells order which is to be executed once the stock reaches a certain price. The stop-loss order helps investors in limiting their losses on a position. |
| Stop-limit order | Similar to a stop-loss order, the stop-limit order is a buy or sells order with a limit on the price at which it will execute. Stop-limit order may guarantee a price limit however there is no guarantee that order will be filled. |
Step 07: Place your Sell Order
Sothe time has come when you decided to sell the shares you invested in. It couldbe because you’ve attained the financial goal for which you have purchased thatspecific stock or maybe because the stock is falling from a long-time and youdon’t plan to continue your losses in the future. Whether it is in profit orloss – not significant! What important for you right now is to understand howto sell the shares.
Well,the most basic way is through the market order to exit your position at thecurrent share price. However, even in this, you may end up selling at a differentprice from what you expected to sell.
Here,you can use the limit order or stop-loss order to ensure to exit the positionat a certain price. You can also set the no. of shares you plan to sell. Oncethe order hits, you’ll exit out of your position and the respective profit orloss will appear in your Demat account.
Ifyou’re nervous and don’t fill like selling the shares then you can continue tohold the shares for a long-term perspective. Besides, buy & hold is one ofthe most common practices practised by many prestigious investors in themarket.
Hope,this will help you in understanding the procedure of buying and selling sharesin the stock market. Also, we hope it will encourage you as well to boostretail participation in the stock market to revive the economic growth of thecountry.
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