Stock Market Basics: How To Start Investing With A Little Money?

Stock Market is a place an individual wishes to invest but only few go ahead as it requires ample knowledge and one wrong decision can wipe out all the savings.

In India, trading can be done through Bombay Stock Exchange (BSE) and National Stock Exchanges (NSE) are two stock exchanges.

There are different ways by which one can start investing such as online or through a stockbroker or investment firm.

Here are share market basics to be carried before you start trading in stock market:

1) Bank Account

It is very essential to have a bank account. This account will be useful when you want to receive or hold funds for transaction.

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2) Demat account

Demat account is mandatory if you want to hold securities in demat form. Means, you can hold your equities, mutual funds and debentures in online form.

3) Trading Account

Trading account is used for placing buy or sell orders. The main transaction of shares is done through the trading account.

The trading account acts like an intermediary between your savings account and your Demat account. Now, most of the banks are providing all these service in a single account famously know as 3 in 1 account. Having this 3 in 1 account can help you trade in shares online.

Difference between trading account and demat account

4) Fair Knowledge on concepts

Gain knowledge on the necessary concepts before investing. Understanding on financial earnings, annual reports, and any news of the investing company will help you make better decisions. This is a share market investment basic that is much required.

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If not, one can always seek help of stock brokers or of intermediaries.

5) How to invest small amounts in the stock market?

If you are a beginner, it makes sense to invest small amounts in the stock market. Once you begin understanding the finer nuances of the markets, you can take a greater exposure.

Investment depends on your risk and tenure of your investment. Remember, another factor is your age. When you are young your risk taking ability is far greater.

As investing in stock market comes with the risk, one should be careful and wise on deciding the amount of investment.

Investors should be aware about the risk that they are taking and should invest in such that it should match their risk tolerance.

Many analysts and experts suggest taking the Systematic Investment Plan route to invest. In this mechanism one invests a small amount each month in a systematic way.

The one advantage of doing so, is that it enables you to average out costs, in case the markets fall.

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