Share Market: the Door to Fortune

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For years we have been listening to people making millions and billions in the stock market ever since we became conscious of our surroundings and gained somewhat financial literacy. But the fact is how do things work? What are shares? How do people make money? How to invest in share market? Questions like these have been reverberating ever since. So let us break today all the shackles of confusion and gain the share market enlightenment.

As a novice who has jumped into the market, things might seem intimidating and bewildering at the beginning. First things first opening an account for trading, the process only might seem to eat the user up.

Opening a Demat account:

Demat is the acronym for dematerialized. A Demat account is capable of holding shares in the electronic form thus eliminating the hassles of holding shares in physical form, this makes the process easier and convenient for traders and the company as well. To open a Demat account first a depository participant should be chosen with whom the Demat account is intended to open. Potential customers can compare different depository participants available and chose one according to their convenience.

After choosing a depository participant, several documents are required to be submitted to complete the registration and verification process. These documents include photo identity cards such as Aadhaar, PAN, or Voter ID card; bank account details that are to be linked to the Demat account into which money will be transferred and withdrawn from; other personal details such as Father's and Mother's name, user's age, email, other such details, etc. After providing these details the brokerage or the depository participant chosen will take 24-48 hrs to verify all the details. Thereafter all the details will be provided by the depository participant such as login id, password, etc.

Trading in the share market:

After successful completion of opening a Demat account, all that is left to do is perform trades. The classic and most basic definition of trading is buying and selling articles. Similarly, trading in the share market means buying and selling shares of any company. The math behind the trading and profit generation is fairly simple, let us try to understand with an example:

Rahul is a guy who has just entered the share market. He buys 20 shares of company X @ Rs.40/share, so his total holdings become 20x40=Rs.800. This is Rahul’s portfolio. Now as the price increased Rahul decided to sell the shares when shares reached @Rs.60/share, so he earned 20x60= Rs.1200. So, profit made is 1200-800= Rs.400. A part of this money goes to the depository participant as a brokerage that is a very small amount.

Conclusion:

Share market is a place where some people end up making fortunes and some flushing away their lifetime earnings. Losses and profits are part of the game here. But with the right skill set and knowledge, the losses can be significantly minimized if not avoided completely. So, one should fairly be careful while making trades.

Before you start investing in the stock market, you must have a Demat account. You can open a Demat account with 5paisa.