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One of the great ways to invest your hard earned money is in the share market. This will definitely give you a higher share of returns as compared to putting your money in a savings account. However, many of us, especially those of us who are not from a commerce background, would find it very confusing and difficult when start thinking about how to start invests in share market in India. There are so many terminologies that many of us find intimidating when we think about how to invest in share market in India for beginners. The sad truth is that this makes many people decide not to invest in share market. But this would not be the best decision. So, to put all your confusion at bay, we have created a guide for beginners that will help you understand how to invest in share market in India, as well as the steps to invest in share market in India.
Before going into a lot of detail, it is imperative that you understand some of the basic terms and definitions in order to invest in the Indian stock market. Here is a list of the most important terms you should know:
Stock Markets – A stock market is also known as an equity market or share market. It is nothing but the aggregation of buyers and sellers, who come together in order to trade company shares, stock or derivatives. The market is a space where buyers and sellers can enter into transactions with each other to sell or buy shares, bonds, debentures. For example: shares of a private company, say Axis Bank, will be sold to investors through equity crowd funding platforms. Stock exchanges list shares of common equity, as well as other security types such as corporate bonds, and convertible bonds.
Stock Exchange - A stock exchange provides facilities for stock brokers and traders, to trade company stocks and other securities. In India, The Bombay Stock Exchange Limited, or BSE has a nationwide reach with a presence in 417 cities and towns of India. Its index or market indicator is known as the Sensex. The National Stock Exchange of India, or S&P CNX Nifty, or simply Nifty, is the leading index for large companies in India.
Shares – A share is also known as equity or stock. Instead of taking large loans from one person, companies often gather funding by splitting capital into smaller units, and allowing people to invest in these units. These units of trade are called shares. You should know that equity is a share in the ownership of a company. It represents a claim on the company's assets and earnings.
Broker – Most often, people are too busy with their daily lives to go to the stock exchange in person and invest. Therefore, the broker is a person who will do the trading for you. In India, this could be an individual, a registered company of brokers or an online agency. While choosing a broker, make sure that he or she has a valid license and is registered with the Securities and Exchanges Board of India (SEBI). You could also choose to trade online without the help of a broker.
Demat and Trading Account – As you know, shares cannot be taken physically and stored in some place. Therefore, a Demat account will hold stocks and shares under your name, which will also reflect in your stock portfolio. A Trading account is created for the purpose of buying and selling shares in the stock market.
Now that you have a clear idea about the terms and important definitions, you are already on your way to start investing in share market in India. If you have had questions like how to invest in share market in India and what are the steps to invest in share market in India, we hope we have successfully answered those questions. However, please note that this article is intended for beginners only. Once you start investing, you will learn a lot more, and will be able to make smarter and better financial decisions. We hope we have clarified everything regarding how to invest in share market in India for beginners. In case you have any further queries, do leave us a comment, and we will get back to you as soon as possible.
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