HOW TO DO TRADING AND INVESTING IN INDIA?
I have been investing in the stock market here and there from mid-2016. During this recession due to covid 19 I personally decided to invest for a longer term and also expand my investment portfolio.
How do you start building a portfolio?
To start with you need a demat-trading account. Banks (like hdfc bank and icici bank) and nonbanking (like zerodha and angle broking) entities in India offer a demat-trading account.
A Trading account is through which you buy or sell shares, mutual funds, buy bonds and invest in gold bonds and government T-bills.
A demat account is where the shares or bonds you bought or whatever you invest in your trading account are digitally delivered to you by the broker.
I have a trading account in hdfcsecurities in India. I buy 500 shares of a company which is listed in the share market like nse or bse. That hdfcsecurities is connected with my bank account in hdfc bank via my demat account. The money for 500 shares is taken immediately from my bank account or trading account and I will get a confirmation though my bank account that the trade has happened. If you have invested for long term not day traded, the shares will come into your demat account after 48 hrs of the purchase or on the 2nd day of purchase.
Where can you buy these shares?
If you want to invest in a blue-chip company like Itc or reliance or tata power, they are listed in both nse and bse.
NSE abbreviation is National stock exchange and BSE abbreviation is Bombay stock exchange.
I have been trading only in NSE as it is the biggest stock exchange in India, while BSE is the oldest stock exchange in India.
Suppose you want to earn money in a quick way and within a day, one way is to do intraday trading.
The markets open up at 9:30 local time India.
I like to buy Itc shares. I place an order of 200 shares of Itc in nse at 200 INR per share in intraday trading when the markets open at 9:30. I can buy these shares at any point of the day when the markets are open but these intraday trading shares, I cannot hold it longer than the trading session/day. I must sell it off before the markets close at 3:30 in the evening.
It is pure speculation, Itc share might go up or go down or be the same. At noon if the shares go up to 205 or 208, I see a profit of 5 to 8 INR per share. I can sell them off immediately or wait still the closing time. If something goes bad the share can be trading at 196 or 198 INR. I am staring at a loss of 2 to 4 inr per share and I am in a panic mode. Instead of losing even more. I can sell them off now without losing even more. Money lost or gained is entirely your luck. You will have to analyze the company before investing or trading.
Investing isn’t like intraday trading; you can purchase a share at any point of the day when the markets are open. But cannot sell them during the same day, as they come into your demat account only after trading day + 2 days for delivery into your demat account.
Some people will sell their shares within 3 weeks some for short term investment profit. Some hold it for 5+ years even.
Most of the invested shares are meant for long term purposes, as it gives dividends per qtr or yearly from the profits the companies make. It is not compulsory for the company to give dividends. The company can reinvest the profits too instead of giving the dividends and make per share grow even more.
My personal suggestion for the people who want to do investing and trading:
Always invest for the long-term perspective so that you can earn huge profits than short term investing or day trading. Always have patience.
Always diversify your portfolio, like have fmcg shares, banking shares, it shares, pharma shares and so on in your portfolio and in those sectors which I have mentioned don’t put all your eggs in one basket. If you are investing the banking sector spread your investment across a number of well-known banks. In this way you will be minimizing your risk.
For those who want to do day trading for a living a stable passive income of 1 million inr (10 lakhs INR) or more is mandatory and should have been doing investments for 3 to 5 years and day trading in small quantities for 1 or 2 years at first to understand how it works. I suggest only then make it a full-time carrier.
I personally wouldn’t invest more than 100,000 INR in a day trade in buying shares. Investing and buying a share for a long term is different.
Those who want to invest for a long term always invest in either 3 or 4 slots of your total money. Divide your money and invest.
I feel this is how a healthy investment portfolio should look like:
20% in Shares
25% in Fixed deposit
15% in liquid cash or in savings account.
15% in bonds, mutual funds, government tbills.
15% in property.
5-10% in gold and gold coins.