Investing in shares is very easy and simple process. The whole transaction of sale and purchase take place online. You must have a DEMAT account, through which you purchase or sale shares. Although the process is very easy but the investment in shares is not risk free. It may lead to loss or gain. In this article I am sharing the whole process of “how to invest in shares online”.
The following steps will help to you invest in share market
Step 1: Know what is share?
A company requires money to run its business. The money raised by the company to run its business is called capital. A share is a portion of capital of a company. In other words, the capital is divided into shares of various values. Each share is offered for sale to raise capital for company.
For example, ABC Ltd. requires Rs. 5 Lac capital to run its business. The capital is divided into shares of Rs. 10 each. Now there will be 50,000 shares of Rs. 10 each. It means value of one share is Rs. 10.
The capital is divided into small units of shares because:
- More people could afford to purchase shares
- The company can offer shares to public at large.
Step 2: Know how to invest in shares of a company?
A company is divided into two types one is private company and other is public company.
Read here the Types of Companies.
The shares of private companies are privately held by a group of people and they are not allowed to raise capital by public issue. To raise capital through public issue, the private company is converted to public company.
Only public companies are allowed to raise capital through public. So mainly, shares are purchased of public company only.
You can purchase the shares of a company either from the company itself, in an Initial public offer (IPO) (primary market) or in a share market (secondary market) from a third party.
Initial public offer is the situation when a company first time offers shares to the public. Anybody can purchase share at the time of IPO.
Whereas in share market, already purchased shares are traded by public.
If ABC Ltd., a company, wants to raise Rs. 5 Lac capital, then it has option to go to public and raise capital by Initial Public Offer (IPO). In IPO, any body can purchase shares. Suppose Mr. X purchase 100 shares of Rs. 10 each and later he can sale these shares to Mr.Y in the share market.
Step 4: Have a PAN Card
You need to apply for a PAN card for investing in shares market.
Know here how to apply PAN card online.
Step 5: Open a DEMAT account.
DEMAT account means share are held online in dematerialsed (non-physical) form. So no physical certificate is issued in share purchase in DEMAT account.
There are various authorized bodies which are allowed to open DEMAT account for shareholders. The names of some institutions opening of DEMAT account are: ICICIdirect, HDFC securities, Sharekhan, angelbroking etc.
The general requirements for Opening of DEMAT account are as follows:
- ID Proof like pan card, election card, driving license etc.
- Address proof like Voter ID, passport etc.
- Account opening form of DEMAT body (ICICIdirect, HDFC securities, Sharekhan, angelbroking etc.)
- Bank account
The fee charged for DEMAT is very nominal and differ from institutions to institutions.
Step 6: Now Trade share online
Now you can Trade share online. You can purchase and sell them online. You can also see online gain or loss made on each transaction.
I have tried to explain it in very simple language “how to invest in shares”. My suggestion is “don’t get carried away”. Understand things, Take your time and then invest in small steps. It will be good if you could take the help of some expert. Good Luck!