Gone are the days when trading used to happen Offline. With the ever-growing technology and internet facilities, everything has started coming online and so is the case with trading. We all know that the first step towards buying a share is having a Demat account. Let’s understand how to create this account for free, online.
A Demat account means that the paper version of the stocks or shares, mutual funds, bonds, derivatives, etc has been de-materialized and converted to Electronic form. This ensures the safety of the shares. Nobody can steal them as they are in electronic form. They take less space, are easier to handle, and can be bought or sold sitting anywhere in the world since the facility is now Online. A bank account and a Demat Account are very similar. The only difference is that in this account we store or deposit shares, mutual funds, bonds, etc. A Trading account is used to trade that is, buy or sell the shares. Money from the bank account is transferred to a trading account to purchase or clear the position of the stocks. A trading account acts as the interface between you and the bank account. Opening a Demat account involves many charges such as maintenance, security fee, and of course for opening the account. These charges might make you lose interest in keeping the account if you are not keen on trading the stock regularly. This problem gets resolved by opening a free Demat account. The account opening procedure for a free Demat account is simple. • Decide which bank, brokerage firm, or financial institution can be your DP or depository participant. DP stores all the bonds, stocks, shares, and mutual funds with it. • Click on the new Demat account on it. • Fill in the compulsory details like name address, mobile number. • Upload KYC details like address proof, identity proof, etc. • An In-Person verification is done by the bank by getting access to the Webcam. • Bank or the firm provides you with the rules and regulations of the bank regarding the account. • You need to link your mobile number to your Adhar card to E-sign the form. • Your DP will send your unique Client ID. You are ready to access your Demat account by creating the password. The procedure of opening a trading account is exactly similar. You just have to choose the option of Trading instead of Demat. A Demat account is essential if you want to hold the shares even for a single night. A trading account doesn’t hold the shares. It is a medium of transaction. You can buy or sell through it. So, if you want to get involved actively in buying and selling rather than just holding the position, you must create a trading account as well alongside a Demat account. Opening a Demat account is the first basic step towards trading in the Stock Market.
Most people believe it’s a very tedious and difficult process just like understanding the stock market. On the contrary, it is very simple and anyone can do it easily. But what is meant by a Demat account? De-mat is nothing else but a short form of dematerialization. In the initial years of the stock market, buying and selling was a physical process, wherein shares were a physical asset. But with the advancement of technology, this process became online and the shares became an electronic representation of the physical asset. This account is just like a wallet or a bank account where you can see the electronic representation of your money. A Trading account on the other hand is again like a savings account only. To be able to trade in stocks and shares you need to have a Trading account, because through this account only you will do transactions of money to buy shares. It is important to have a Demat account to be able to hold your shares. You can do Intraday trading only if you do not have a Demat account. Intraday means buying the share or stock in the morning and selling it off in the evening, even if it translates into a loss. Hence, there is no point in having a trading account without a Demat Account. Opening a Demat account is not rocket science. Let’s go through these steps to understand how to create a Demat Account. A DP, or a depository participant, is chosen which is the bank or the broker through which you are going to open your account. Fill up an account opening form and a KYC form by submitting these documents • Pan Card • Identity proof like Adhar card or Driving Licence • Address proof like Electricity bill • Cancelled cheque • Bank statement or salary slip • A passport size photograph An In-Person Verification will be done to check if it's you who is doing the process. Earlier it would involve an official coming to your home. Now the same process is done by giving access to the WebCam. Read the instructions carefully provided in the copy of rules and regulations provided by the DP before signing on the dotted line. You get the unique Client ID in the end. Make your password and you are ready to log in to your Demat Account. With the help of these simple steps, you can very easily create your Demat Account. So without further ado, create your Demat Account and join the force of 6.9 crore investors in India. SIP IN STOCKS Stock SIP (systematic investment plan ) is an easy method of investing in stocks. It enables investors to buy stocks (amounts/quantity based ) ,periodically (weekly, monthly ,etc. ) in a systematic way. It helps you to make the best of the unpredictable market by adopting a disciplined investment strategy. Mutual funds and other investment companies offer investors a variety of investment options including systematic investment plans. SIP IN STOCKS SIPs give investors a chance to invest small sums of money over a longer period of time rather than having to make large lump sums at one go. Investing in SIP enables an investor to take part in the stock markets without actively timing them and he/she can benefit by buying more units when the price falls and less units when the price rises. This scheme helps reduce the average cost per unit of investment through a method called Rupee Cost Averaging. With every investment in a SIP plan in India, additional units are added to your account depending on the market rate . With every investment ,the amount being reinvested is larger and so is the return on those investments. Moreover, it is at the discretion of the investor to receive the returns at the end of the SIP’s tenure or at a periodic interval. SIP IN EQUITY SIP investments can be started anytime ensuring minimum risk with the correct suitable plan for the investor. It is very important to choose a scheme which suits an individual ‘s long-term goals well. So, there is no suitable time frame within which an investor should start a SIP investment plan, the sooner the better. SIP in stocks allows investors to fix either the amount to be invested or the number of shares needed to be purchased at a regular interval. Like mutual funds SIP ,an equity SIP or ESIP allows investor to invest in stocks in a disciplined manner ,helps them spread their investments over time, and lets them benefit from rupee cost averaging ,thereby creating a sizable corpus with small investments .ESIPs are a good option for investors as one can get more stocks when the prices are low ,as compared with the tenure when the prices are higher. But one limitation of ESIP to be aware of is that it may not necessarily offer you the advantages of price averaging. One of the important rules of equity investment is buying at the right valuation but with systematic investments in stocks, one does not look forward at the valuations rather they look at the number of units he/she might be getting. Just recently, the market has been volatile which made the investors highly impatient and concerned. During these unpredictable conditions of the market , the SIP method of investing in mutual funds is highly recommended. Similarly equity SIP is a way of making small investments in stocks periodically and thereby taking advantage of the fluctuating stock prices. Therefore , the ESIP mode of investment can be useful for direct equity investors. This mode can help abstain from timing the market ,invest with a systematic approach and stay in a safe position during unpredictable times. However, it is essential to narrow down and make an informed decision while picking stocks for direct ESIP. The mutual fund SIP allows automatic diversification, but Equity SIP does not. Investors need to select organizations that are providing strong growth in earnings, proper governance, and ratios of high returns. Therefore ,it is recommended to have a thorough knowledge before choosing a stock to invest in. STOCK SIP IDEAS -Bajaj Finserv. 3 yrs Annual Returns. 62.42% -ICICI Bnk . 3 yrs Annual Returns. 37.63% -Reliance Inds.3 yrs .Annual Returns. 34.90% -Larsen &Toubro.3 yrs.Annual Returns. 21.47% -Indusland Bank. 3 yrs .Annual Returns.5.95% -Maruti Suzuki.3 yrs.Annual Returns.1.43% -ITC.3 yrs. Annual Returns . -3.98% Above mentioned are some of the best SIP ideas .The funds shortlisted are purely based on 3- year annualized returns .Please note, some mutual funds are subject to market risk and require careful consideration before investing. Systematic investment plan is considered as one of the safest and best ways to increase one’s wealth in today’s turbulent scenario. The basic rule to start investing in SIP is the early you start ,the better it would be. The longer you stay ,the more you are going to reap fruits of compounding .The consistency would pay you in the form of a mammoth mount. To begin with, many people might find mutual funds complicated and intimidating. Well, to simplify it – a mutual fund is a type of investment vehicle consisting of portfolios of stocks, bonds or other securities. These funds give small or individual investors access to diversified professionally managed portfolios at a low price. These are of different categories representing the kind of securities they invest in, their investment objectives and the type of returns they seek. Mutual funds charge annual fees called expense ratios and in some cases, commissions, which can affect their overall returns. Mutual Funds Investmen Mutual funds pool money from the investing public and use that money to buy other securities ,usually stocks and bonds. The value of the mutual fund company depends on the performance of the securities it decides to buy. So, when you buy a unit or share of a mutual fund, you are buying the performance of its portfolio or more precisely , a part of the portfolio’s value. Investing in a share of a mutual fund is different from investing in shares of stock. Unlike stock, mutual fund shares do not give its holders any voting rights. A share of a mutual fund represents investments in many different stocks instead of just one holding. That’s why the price of a mutual fund share is referred to as the net asset value (NAV) per share. A fund’s NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding which are held by all shareholders, institutional investors and company officers or insiders. Investors earn a return from a mutual fund in three ways: -Income is earned from dividends on stocks and interest on bonds held in the fund’s portfolio. A fund pays out nearly all of the income received over the year to fund owners in the form of a distribution. Funds often give investors a choice either to receive a cheque for distributions or to reinvest the earnings and get more shares. -If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution . -If fund holdings increase in price but are not sold by the fund manager ,the fund’s shares increase in price. You can then sell your mutual fund shares for a profit in the market. TYPES OF MUTUAL FUNDS TO INVEST Mutual funds are divided into several kinds of categories, representing the kinds of securities they have targeted for their portfolios and the type of return they seek. There is a fund for nearly every type of investor or investment approach. Other common types of mutual funds include money market funds, sector funds, alternative funds, smart-beta funds, target –date funds and even funds of funds ,or mutual funds that buy shares of other mutual funds. BEST PERFORMING MUTUAL FUNDS Given below is a list of top 10 mutual fund schemes .There are two schemes from five different categories which a regular investor might find useful. -Axis Bluechip Fund -Mirae Asset Large Cap Fund -Parag Parikh Long Term Equity Fund -Kotak Standard Multicap Fund -Axis Midcap Fund -DSP Midcap Fund -Axis Small Cap Fund -SBI Small Cap Fund -SBI Equity Hybrid Fund -Mirae Asset Hybrid Equity Fund Aggressive hybrid schemes are ideal for newcomers to equity mutual funds .These schemes invest in a mix of equity (65-80%) and debt (20-35). Because of this hybrid portfolio they are considered relatively less volatile than pure equity schemes that invest the entire corpus only in stocks. Aggressive hybrid schemes are the best investment vehicle for very conservative equity investors looking to create long-term wealth without much volatility. On this note, please take a wise and well informed decision before taking a leap to invest your hard earned money |
AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
December 2021
Categories |