Everyone of us are engaged in some kind of jobs to earn a living and there are chances that some of us are left with good amount of savings. It is better to invest some of our savings that can give high returns over a period of time. Investing in stocks is an option for you to earn high returns. And of course, high return comes with a high risk as well. But carefully analyzing stocks and finding a good company can keep the risk low.
Now, how do you start stock trading? Well, first thing you should do is to apply for a PAN (Personal Account Number) card that is issued by the Income Tax Department of India. You can apply it through the local agents in your area. Once you obtain this, you should open three kinds of accounts; a savings account, a demat account and an online trading account.
Savings account is the normal bank account that we put our savings. Most of us will be already having that. Demat account is for holding the shares in electronic form. In earlier days when we buy shares from share broker, they will issue a certificate as a proof that you are holding certain shares of a particular company. But now when you buy shares online, these shares are held in dematerialized form and is shown your demat account. The next kind of account is the online trading account which is used to buy and sell stocks. You will be able to open all the three accounts with one bank itself. Most of the major banks in India provide 3-in-1 account for stock trading.
Once your accounts are opened, next thing you would want to do is start trading. Now, there are mainly two methods of analyzing stocks called fundamental analysis and technical analysis. It is very important to analyse stocks and find companies that can possibly give you good returns in the future. In fundamental analysis we look into financial statements of companies, it's management, competitors etc. to find good companies. But in technical analysis, we study the movement of price and volume of stocks in the past to predict its future price movement. Some great investors like Warren Buffet uses Benjamin Graham's value investing strategy to invest in stocks. Value investing is the method of investing in stocks in which you calculate the intrinsic value of a company and buy the shares of the company at a bargain price below it's intrinsic value.
