Why people get attracted to buy shares in India online? The reason for this attraction is simple. Investing online means person is buying & selling shares on their own. Online buying gives them more control. Timing the market becomes comparatively easier. So returns also improve. Internet has made it all possible.
Timing the market is in control and that too from comfort of home.
Share market was difficult for common men because of lack of know-how. Internet has solved this problem. Authentic information about shares are available on internet. People with even limited savings can know about shares.
People can start to buy shares in India online even with Rs 500. Shares and ETF investment is perhaps the only investing tool that is both cheap and easy-to-do.
Compare shares with Mutual Fund. Ease with which one can buy shares in India online (compared to mutual funds) is fantastic.But these days even mutual fund purchase has become as easy as shares. But at this point of time, probably mutual fund investment (online) is perhaps more cost intensive.
Compare shares with real estate property. One can buy stocks with Rs.500 in pocket. But one may not be able to buy a property even with Rs 100,000 in pocket. In short, property investment is too expensive for a common man.
Investments that are popular among common men are all low-capital-intensive options. People have fast-cash-flow-in in form of salary. Systematic investments (like SIP’s) which does not demand large sums of money are more popular. It is much easier to invest small amounts regularly than invest large amounts.
Share trading is not capital intensive. Online trading also eliminated interference of middle men
Involvement of common man in share market has increased a lot in last decade. Possibility to buy shares in India online has eliminated the interference of middle men (stock brokers).
Earlier, brokers used to buy stocks for us. In turn, they used charged commissions. Back then, brokers were the only source of stock purchase. The down side of trading through brokers was high commission & third party dependency. Their charges used used to eat away the profits of share trading if any.
Some broker charge fees in tune of: 6-8% of purchase cost. At times it is difficult to earn earn 6-8% profit in share trading. Giving commission of 6-8% looks like a luxury.
People like me, who likes to do things by seelf, used to avoid stock market all together because of brokers intervention. Uneasiness in dealing with brokers was high. But online trading platforms with facility to buy shares online changed things for good.
Why everyone does not buy shares in India?
The ease with which one can buy shares makes it likable. The affordability factor makes it even more likable. If its so good, why everyone does not buy shares in India?
Frankly speaking, people cannot dare to invest in stocks. The risk of loss in shares investment is high. Shares themselves are not risky. Lack of know-how results in loss of money.
There are people who are making fortunes from shares investing. These people have acquired skills that other do not know.
They know how to screen stocks. Identification of fundamentally sound companies, and buying them at right price is all one needs to take care to buy shares in India.
Fundamental checking and market price valuation of shares is essential. Before one buy shares in India online, careful analysis is a must.
Why people hesitate to buy shares online…
Online trading platforms are very convenient to use. Still many people hesitate to buy and sell shares online.
There are people who are still not convenient living an online life. The discomfort gets even more enhanced when it comes to dealing in shares online.
For many people, the big question is, how to buy shares in India online? Is online trading safe?
People who are not so internet savvy hesitate to buy shares online. But actually, stock trading is so simple that any one can use it.
If one knows how to read and write emails, buying shares online is as easy. In this article we will see how easily one can buy shares in India online.
Buying shares online does not start immediately. One must first complete few formalities with banks to start online share trading.
Know-how about stocks evaluation is also essential. Stocks evaluation is not so easy to learn. This is one big reason why less people are successful in stock investing. Important questions about online stock investing must be answered:
- How to buy stocks online?
- What is the process of buying stocks online?
- How to evaluate good stocks?
(1) How to buy shares online…
When people used to buy shares through brokers, lump-sum investment was more prevalent. Every month people used to save money. As soon as decent savings got accumulated, people used to approach brokers for stocks purchase.
But that process had some disadvantages. It used to take time to accumulate savings. Buying stocks through brokers also used to take few days.
The disadvantage was not only time. It was not necessary, that when money is ready, that is the right time to buy stocks. And, when its time to buy stocks, people may not have money for investing.
But when people started buying shares online in India, timing the market became easier. If one cannot time the market, systematic stock purchase is another good alternative.
Online share trading facilitates investors to buy stocks systematically. Small amount of money can be diverted to buy shares online. Investing systematically allows people to take advantage of dollar cost averaging. When share price is low more shares are purchased. When share price is high, less shares are purchased.
As a result of this, long terms results are averaged and optimized. Possibility to face big losses gets reduced in systematic investing.
Accumulating stocks systematically over time is a great idea:
Experts do not accumulate quality shares all at one time. Common men can use the same strategy. They can budget their systematic purchase of quality shares.
I have a friend who accumulated huge number of ‘quality stocks’ in span of last 7 years. He used to buy shares of few specific companies both in good and bad market situation.
This gradual but systematic shares purchase has helped him to develop a substantial stock portfolio. I asked him why he does not buy stocks in lump-sum. His answer was simple, he said, “if I am not buying every month, probably I will spend that money elsewhere”.
Once one is ready for systematic stocks purchasing, next step can be taken. One may ask, how to buy and sell stocks online?
Following things must be ready to trade shares online:
#1.1. Start Online Banking:
The next step is to activate online banking facility. These days all banks have online banking facility. Banks like ICICI, HDFC etrade, AXIS, etc provides online banking. Most of us already maintain bank accounts in these banks. Even if your bank does not provide online banking facility you shall not worry. Banks who do not offer online banking has online fund transfer facility. But I will suggest to maintain online banking facility. This will prove very useful when stock trading is done more frequently.
#1.2. Open Online Trading Account:
Once one has online banking, they must link it with a online trading account. Only brokers are allowed to buy/sell stocks in stock market. Brokers are members of stock exchange. These days online-brokers are more prevalent. Companies like HDFC Securities, AXIS Direct, ICICI Direct are few well known online brokers. Opening an online trading account with these brokers is requried. Once trading a/c gets operational, next step us simple:
#1.3. Login > Transfer Funds > Buy/Sell Stocks.
Online trading accounts allow web-portals based trading. These portals gives indirect access to stock exchange (like BSE & NSE). Indirect access to stocks-market enables people to buy stocks online. User gives command to online brokers (using web portals). Information about stocks buying or selling is done automatically by the online brokers.
Online Stock Trading Platform in India:
Smart Start by HSBC
SMC Select by SMC
Trade Terminal by India Infoline
Smart Start by Kotak Securities
Angel Investor by Angel Broking
R-ACE by Religare
Power Indiabulls (PIB) by Indiabulls
Etrade by HDFC
SBICAP Securities by State Bank of India
Baroda e-Trading by Bank of Baroda
Axis Direct by Axis Bank
ICICI Direct bu ICICI Bank
#1.4. Open Demat Account:
Stocks can be traded online. They are also stored in dematerialized form. Initially, shareholders used to keep share-certificates as proof of holding. These days share-certificates are kept in demat accounts. These days opening a demat account to trade stocks is essential. Demat account are like banks but instead of keeping money they keep stocks in dematerialized format. To open a demat account one should approach SEBI registered depository participants. Names of few renowned depository participants are: Allahabad Bank, Andhra Bank, Axis Bank Limited, Bank of Baroda, Bank of India, BNP Paribas, Canara Bank, Citibank N.A., City Union Bank Limited, Corporation Bank, Dena Bank, ICICI Bank Ltd, IDBI Bank Limited, Kotak Mahindra Bank Limited, Punjab National Bank, State Bank Of India, UCO Bank, Union Bank of India, Yes Bank, etc…
(2) What is the process to buy shares online?
Here one must have bank account, demat account and online trading account. Now stocks can be bought and sold even from comfort of ones home. Generally stock trading is possible in India between 9:30AM to 3:30PM. Stocks can be traded on all working days from Monday to Friday. In case of bank holidays or national holidays, stocks exchange is also closed. In India we have 2 main stocks exchange, BOMBAY STOCK EXCHANGE (BSE) and NATIONAL STOCK EXCHANGE (NSE).
Log into you online trading account. Visit the online portal of your trading account. To log-in your trading platform will have a user name a password. Make sure to memorize these important login details. After logging in one can start the process of stock buy and sell. But what can be doe if one does not know what to buy. Knowing the name of company whose stocks can be purchased is essential.
It is important to do a pre-study before selecting a stocks. Stocks study is not just study of its market price. More than price, its is important to judge companies fundamentals. One can use the websites like moneycontrol, yahoo finance, google finance to study stocks data. Studying stocks balance sheets, income statements & cash flow statement is necessary. A proper study of stocks before its purchase will improve long term profitability of investor.
To buy stocks, put a buy-order to trading account and wait for order execution. Setting up a price-limit to buy stocks is a good habit. Suppose a stock is trading at Rs 101, and the price limit you have put is Rs 100, in this case you will not be able to buy unless the price falls to Rs 100. Approximate brokerage charged for transactions is 0.5% of your basic price. Steps to be followed to buy stocks:
(1) Select the Option “Buy” from menu.
(2) Select the name of stock to be purchased
(3)Enter the quantity of stocks to be purchased
(4)Selection the option of “Limit Price”
(4)Enter the Limiting price at which stocks to be purchased
(5)Place the order by pressing “Place Order” button
How to sell stocks online? The process of selling is same as buying stocks. One needs to put the sell-order by specifying the number of stocks to sell and at what price. Buy the only difference with buying stocks is that, you do not need to book any funds. Selling is lot easier & faster than buying stocks. One can sell only those stocks that one holds in demat account. Steps to be followed to sell stocks:
(1) Select the Option “Sell” from menu.
(2) Select the name of stock to be sold
(3)Enter the quantity of stocks to be sold
(4)Selection the option of “Limit Price”
(4)Enter the Limiting price at which stocks to be sold
(5)Place the order by pressing “Place Order” button
(3) How to evaluate good stocks?
The rule of thumb to successfully evaluate stocks is to focus on its fundamentals. When fundamentally strong stocks are available at undervalued price only then grab it. But tough part is how to screen fundamentally strong stocks? A company which is not dependent on debt to fund its operating expense are fundamentally strong. Another parameters that confirms fundamental strength of company is profit growth. Company shall increase its profits YOY at a rate higher than inflation. A fundamentally strong company is one that has majority market share in its sector. Look for Top 3 companies with highest sales turnover in its sector. A fundamentally strong company should also be very profitable. To check companies profitability look at its Return on Capital Employed (ROCE). Companies that enjoys high ROCE are fundamentally strong companies.