How to Invest in Share Market? – A Guide to Investing in Shares

By Advisorymandi
14-January-2019 12:26:34 PM

How can a beginner investor invest in the share market in India? – That’s one question which comes in the mind of every beginner who plans to invest in the share market. As a beginner investor, it is quite complicated to invest in the stock market since it requires a standard procedure of opening a share market demat account followed by the certain knowledge of buying and selling of stocks in the stock market.

Besides, in India, there are plenty of people around you who would pour opinions from all directions. The surprising thing is, even those people give you tips and suggestions who have never invested in share market in their whole life. So, if you are planning to invest in the stock market to make investments that could beat inflation and give you good returns over a period of time then what you need to know is, “How to invest in the share market in India?” Also, you need to be aware of stock market basics that allow you to understand the several important things of the stock market that are utmost necessary for any beginner investor.

Thus, we have mentioned a few things that you must know before you start investing in shares.


How to Invest in Share Market Online – A Step-by-step Procedure


Although there are a lot of things to consider not just opening a Demat account while investing in shares in India but for the time being let’s take a look at the procedure to invest in stock market online in India to get started with stock market investments.

If you are a beginner then this is your go-to-guide to invest in shares in India.


Step 01: Get a PAN CARD or AADHAR Card


To invest in the share market in India, the very first step is to have at least one identification proof. Although it would be wise carrying both Pan card and Aadhar card. PAN Card or Aadhar Card is the mandatory requirement for entering in any financial activity. Whether it is related to a financial transaction or opening an account to start investing in shares. It is because both PAN/Aadhar is required for KYC (Know Your Client) procedure to open a Demat account with the market regulator, the Securities & Exchange Board of India (SEBI). So, if you don’t have, go get first!


Step 02: Get a Broker


The next step in the line is to get a broker. You, I or anyone else cannot go straight in some exchange and start buying or selling stocks like we buy daily groceries. There are certain people called ‘brokers’ that are authorized to do this. The brokers could be individuals or brokerage firms and even online agencies that are registered and licensed by SEBI to do so. There are also un-registered brokers and brokerage firms in the market claim to be the authorized, genuine firms to trade and invest in the stock market. But, beware! Don’t deal with such un-registered brokers/sub-brokers or any unauthorized intermediary.

Thus, it would be wise to get an authorized broker which is licensed by SEBI, Indian market regulator to trade in share market.


Step 03: Open a Demat Account


Now that you have chosen the broker or brokerage firm, it is time to open a Demat account. It is because unlike past days, now the shares are traded in dematerialized form, not in physical form. In order to do this one have to have a Demat or trading account to start investing in shares. This Demat account you will have will not only allow you to trade stocks but also hold the stocks under your name and will reflect the same in your investment portfolio. With the facility of Demat and trading account, you no longer have to hold the physical share certificate in your hands again. With the Demat account, it will show in your account statement.

Back then the Demat account and trading account were different. But, now the brokerage firms and brokers take care of this by opening the trading and Demat account simultaneously. As we mentioned above, there is a mandatory requirement of PAN or Aadhar card for investing in the share market in India. But, now the government has mandated other things such as bank statements, canceled cheque, and few other documents for opening a Demat account. There are few things to take into account such as:

  • Give clear instructions to your broker and always insist on the contract notes. It is because if you have doubts about the authentication or genuineness of the document then you can check on the NSE or BSE website.
  • Always keep copies of your investment documents and documents you send to companies such as application forms, contract notes, trading member, and transfer agent etc.
  • Never execute any document without the understanding of terms and conditions of the intermediary.
  • Most importantly, don’t get swayed by promises of high returns.

Step 04: Check for Depository Participant


Usually, it is taken care of by the brokers but it would be wise to aware of it none-the-less. There are two depositories in India – NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). These two depository participants have their agents to provide the account to store the shares. But, these accounts are different from trading or Demat accounts.


Step 05: Buying & Selling Shares


Now that the account has full set-up and you finished all the formalities you can start buying and selling shares. In order to perform, you need to inform your broker about which share in what quantity you wish to buy or sell along with the price you wish to carry out the transaction.

For example, if you are planning to buy the 20 shares of Tata Steel Ltd. (TATASTEEL) at Rs. 480.00 then you can place an order with your online brokerage account. If you have no access to the internet at the moment, then you can simply place an order by informing the same to your broker; Buy Shares: Tata Steel Ltd. Quantity: 20; Price: Rs. 480.00. When the shares reach that point then the transaction will be made on your behalf. Same is done in case of selling. For example, Sell Tata Steel Ltd, Quantity: 20; Price: Rs. 500. The sell order will be processed when the shares reach that price. In fact when your order will reach its expiry date then your stockbroker will let you know about the same.

In India, to invest in stock market one has to place buy or sell order in two exchanges:

  • NSE (National Stock Exchange)
  • BSE (Bombay Stock Exchange)

NSE & BSE are two major stock exchanges in India where buying and selling of shares take place.


Note: – Don’t forget to mention the exchange to your broker. It is because there is a difference in price of shares at both exchanges. Also, if you plan to be involved in investing in shares more than 1 lakh rupees then you gotta need a UIN Number. It is a Unique Identification number for trading in the stock market. But, if you only gonna invest less than 1 lakh then you won’t need a Unique Identification Number.


How to Invest in Share Market for Beginners?


If you think that by understanding the procedure of investing in the share market you understood the nitty-gritty of the market then you are absolutely wrong! If you are a beginner and think that you can beat inflation and get good returns by investing in the share market then you are delusional. Just because you have opened your account, it doesn’t mean you can randomly invest without knowing the ABCD of the stock market.

No doubt if properly understood, you can earn a lot of money in investing in shares. But, without proper knowledge, things could go sideways and you can lose all your money. Therefore, we are going to discuss a few important steps to invest in share market for beginners.


Set Your Goals


Investing in the stock market is a great way to receive good returns. The share market has given good returns over the years. The year 2017 was a great year for Indian markets. It gave huge returns than the fixed deposits and other investment options. Many a time it happens that after listening to the story of some friend, neighbor or relative we decide to buy some stocks. In doing so, we look for the procedure to open a Demat account to start investing in shares. However, it has seen many beginners enter in the market with this mindset of winning, open a demat account and invest in stocks after listening to the stock tips from brokerage houses or TV channels but ended up losing most of their fortune in no time.

Thus, it is recommendable to invest in the share market after getting basic knowledge about it and in accordance with your financial requirements and future goals. And not just future needs but present needs as well. That’s why when you finished opening the account; you must determine your present and future financial needs; consider limits such as expenses, income source, and other things. Also, don’t forget to consider the tax liabilities while investing in shares.

So, set your goals first. If you have opened a demat account, is it to do intraday trading or investing in shares for good returns? Also, are you seeking short-term returns or long-term returns?

Once you determined your requirements, the next in the list is to determine your investment strategy.


Strategize Your Investments


You may have heard before that many investors have made fortune through the stock market. Seeing this, many believe that a stock market is a money-making machine which can give you millions whenever you want. Well, it’s true that a lot of investors have made money through the share market. But, whoever made money must have good knowledge of buying and selling of shares, adopted strategies carefully, and also very disciplined in his/her approach to investing.

Thus, after realizing your goals and requirements, you must determine your investment strategy. In doing so, you must pick the right stocks that help you fulfill your needs and achieve your financial goals.

To make sure you determine the accurate investment strategy we’ve made a list of Do’s & Don’ts for beginners who are interested to invest in the share market. We’ve discussed the list of Do’s and Don’ts at the later part of this guide.


Enter at the Right Time


Stocks are recognized for their sudden ups and downs. Market volatility is one of the share market basics usually overlooked by investors. Especially beginner investors who don’t take this seriously while investing in the share market. You need to know when to enter the market. By entering, we mean the appropriate time to buy stocks. In order to do that you need professional skills and good knowledge to identify the right stocks and purchase at the price that will maximize your profits.

So, before placing your first order to make your first share market investment, you would require some best stock market tips and basic knowledge about the stock market.


Monitor Your Portfolio


Now that you’ve placed your first order, it is important to monitor your investment portfolio. You need to understand that stock exchanges are dynamic and market trends are always changing. So, to execute an order to gain potential profits, you need to monitor your investment portfolio time-to-time. However it certainly not means to change your decisions with every tick movement. Understanding the reason behind the movement of individual stocks, economy overview, and companies’ internal activities allow you to minimize the risk of losing capital due to some accidental fluctuation in stock prices.

If the share market history had anything taught us is that even the great bulls run make investors’ go crazy. The volatility we’ve witnessed over these years, it showed us that investors had lost money despite the bulls runs. Hence, it is sensible to say that an investor must keep patience and follow a disciplined investment approach.


Portfolio Diversification


Portfolio diversification is more like a stock market strategy but if you are about to invest in the share market then you need to know the importance of portfolio diversification. Diversification tells only one thing: Do not put all your eggs in one basket. When you are going to invest in the share market, you expect good returns in the distant future. By diversifying your portfolio, you would be able to minimize the risks and maximize your returns. But, aware of over-diversification!


How to Invest in Share Market? – Do’s & Don’ts




  • There is an old saying: It is not a stock market, but a market of stocks. Thus, you need to choose the right stocks before investing your money in it. Work on individual securities and their relationships with broader economy and their respective sectors.
  • Check for the factors that drive the price of stocks.
  • Give yourself a proper understanding of financial metrics and terminologies such as PE Ratio, EPS, Return on Equity (RoE), Market Capitalization, and other metrics etc.
  • Learn the methods of doing fundamental analysis of stocks.
  • Learn about the share market basics and market orders such as market orders, limit stop, stop loss orders and trailing stop loss etc.
  • Gain understandings about the share market and its direct & indirect relationships with the economy. Go through the economic data such as inflation, Gross Domestic Product (GDP), CPI, WPI, Core Retail Sales, and the relation of crude prices and rupee value against the dollar.
  • Have realistic expectations with your investment returns. For instance, the shares have generated more than 100 percent of returns but it doesn’t mean you would expect the same returns with your investments.
  • Review your investment portfolio period.
  • Try to invest in a business you understand not the stock you believe to give you returns immediately.




  • Don’t follow the herd mentality blindly. It has been seen that many share market investors invest in the share market because of the returns have earned by their neighbors, relatives, and acquaintances. Think about it, if everybody would invest in a single stock then the tendency for potential investors is to do the same. But, as a result, this strategy would bounce back and you may end up losing your hard-earned money.
  • “Don’t try to time the market.” It is something that your financial advisor would warn you to avoid. Thus, try not to time the market. Many investors went down to this road and ended up losing far more than investors who have made money.
  • Don’t let your emotions be part of your investment. It has seen that many digital participants have lost their money due to their inability to control their emotions especially fear and greed. It usually starts from the hearing the great stories of some stocks that have given potential returns over a specific short period of time. This misleading information led them to take heavy positions in stocks that are entirely unknown to them. Instead of realizing the involved risk and following their wealth creation plan, these investors lost their entire investment when the sentiment in the market reverses.
  • At last, avoid leverage because using borrowed money to start investing in shares may end up bad for you. Think about it! The brokers may lend you the money but if the use that money to invest in the share market in believing that you would receive fair returns when the market starts moving up, but consider the opposite when the market reverse and start moving down. Not only your investment will erode but you will end up paying interest to your broker. This is what leverage is. It is up to you to use it! Thus, we would recommend you to avoid if you are a beginner investor who plans to invest in the share market in India.


 How to Invest in Share Market? – Infographics



Hope, this article helped you in a way you expected it to be. If you have any query regarding investing in shares or would like to add something then doesn’t forget to mention in the comment section below.


Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.  

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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2 Comments on "How to Invest in Share Market? – A Guide to Investing in Shares"

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Sam Wilson
1 year 1 day ago

As a higher PE ratio means that the company is expensive and a lower PE ratio means that the company is a good bargain buy. If the PE ratio of any company is below its Industry PE then it’s a good bargain buy. Thanks for sharing.

500 per crore
3 months 23 days ago

Balance Sheet.Profit and Loss Accounts,Cash Flow statements These reports should be known well regarding share market