How to buy a stock in Stock Market? Step-by-step Explanation!
A Beginner’s Guide on how to buy a stock in stock market: These days, buying a stock is as simple as recharging your mobile or transferring money. All you need is a computer (or mobile phone) with an internet connection, a bank account (with some money in that account, obviously) and your trading account.
If you’ve watched the TV series “SCAM 1992” and how traders/investors used to place their buy/sell order through brokers in 1980s/90s, the scenario of the market at that time might scare you. It looked even worse than the fish market. However, this was the time 30-40 years back. Now, with the advancement of technology, not much physical appearance of brokers or time-taking paper works is required. Today, you can buy a stock sitting in your room in front of your laptop enjoying a snack and that too within two minutes. How? That’s what we are going to discuss in this article.
Today, we’ll cover how to buy a stock in stock market in the step by step process. Just be with me for the next 8-10 minutes. Let’s get started.
How to buy a stock in Stock Market?
Step 1: Get an Education and Research
A) Read, Read & Read
Buying shares online is an easy task these days because of the fast and easy trading apps. However, the tougher task is to find out what to buy. In order to find the right stock to buy, first, you need to have right skills and knowledge. Therefore, the first step is to read, research, and get an education.
There are tons of stuff available online that you can refer to start learning. One of the best places to begin your journey is by visiting INVESTOPEDIA website. Here, you can learn everything that you want to know about investing. Else, you can subscribe to different stock market youtube channels and learn from the videos. Here’s a list of the 10 Best Youtube Channels to Learn Indian Stock Market that you can follow. In addition, here are a few other online resources that you can also check out to learn stock market investing.
Further, if you’re an avid reader, you can read investing books like The Intelligent Investor by Benjamin Graham, Common stocks, and uncommon profits by Philip Fisher, One up on wall street by Philip Fisher, etc. You can find the list of more recommended stock market investing books to read here. Finally, you can also enroll in different investing courses or workshops to pace up your learning curve.
In short, there are a lot of resources available online, both paid and free. The only thing required from your side is the enthusiasm to learn if you want to get enough knowledge and confidence in this industry.
B) Get Financial Knowledge
Good financial knowledge is key to success in the stock market. You need to understand how to read the financials of a company before entering the investing world. The basics of financial terms and ratios like Earnings per share (EPS), PE Ratio, Book Value, P/BV, Dividend yield, Return on Equity(ROE), Return on capital employed (ROCE), Debt/Equity ratio, etc should be known to you. This will help you to analyze the fundamentals of the company. Here are two posts that you should definitely read to boost your financial knowledge:
- 8 Financial Ratio Analysis that Every Stock Investor Should Know!
- How to read Financial Statements of a Company?
C) Start virtual Investing/Make your dummy portfolio
A portfolio is nothing but your collection of stocks from different sectors/industry. A portfolio shows how many shares you are owning from which sector and how they are performing. Generally, an investor can invest in multiple stocks depending on his preferences. A good portfolio maximizes the profit and minimizes the risk. Once you’ve learned the basics and got financial knowledge, next you need to make your dummy portfolio to test your learnings. This will help you to avoid losses that can be made by directly jumping into the market without any experience. Further, you can learn how to create your portfolio from this article: How to create your Stock Portfolio?
D) Follow the stocks you’re interested in for a few weeks
The last step before buying a stock from the stock market is to learn how to follow stocks in the stock market. You should know how to track stocks so that you can buy/sell them at the best time. There are different apps and websites like Moneycontrol, stockedge etc that you can use to follow the stocks. Further, we advise the beginners to at least follow the stocks for one month before buying them. You can learn how to follow a stock by reading this article: Learn how to follow Stock Market and trends.
Now that you know all the basics for the stock market, you can move further on How to buy a stock in Stock Market?
Step 2: Choose your brokerage account
You need a trading and demat account to start investing in the Indian stock market. Enter stockbrokers!
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- A trading account provides a platform to buy or sell the share in the market. It acts as an intermediary between your saving accounts and demat accounts. Further, a demat account is a facility to keep your shares in an electronic dematerialized form.
- Demat and trading accounts are generally opened together (also known as 2-in-1 account) with most of the popular stockbrokers in India. For example, Zerodha, Angel Broking, 5 Paisa, etc.
- A few big stockbrokers (generally bank brokers) also offer a 3-in-1 account i.e. Saving+Demat+Trading account to their clients. For example ICICI Direct, HDFC Securities, etc.
Basically, a stockbroker is an individual/organization who is a registered member of the stock exchange and are given license to participate in the securities market in place of its clients. From big banking corporations like ICICI Direct, HDFC Securities, Kotak Securities, etc to newer fastly growing startups like Zerodha, Fyers, etc all are examples of stockbrokers in India. A few other famous stockbrokers in India are Sharekhan, Motilal Oswal, Upstox, 5Paisa etc.
Stockbrokers can directly buy & sell stocks in the share market on behalf of their clients and charge a small commission for this service. However, the commission is minimal compared to the fast trading platform that they offer. Using these platforms, you can buy/sell stocks within minutes using your web/phone while sitting on your home sofa.
For the people who don’t simple and fast trading platform, we recommend using Zerodha, the discount broker.
Zerodha is the biggest discount broker in India and perfect for traders & investors looking for low brokerage and reliable trading platform. It offers a zero brokerage for delivery equity & direct mutual fund investments. For all intraday, F&O, currency, and commodity trades across NSE, BSE, MCX, it offers a brokerage of Flat ₹20 irrespective of the trading volume. Therefore, you can save a lot of brokerage charges on your trades using Zerodha as your broker.
Further, Zerodha has built its own trading applications (KITE) for the customers. It offers different trading terminals, websites, and mobile apps (Android/iOS) which are free for the customers. Anyways, if you prefer any other broker, do your research before opening the demat and trading account. A simple google search or reading the reviews by the existing users can help to find red flags about that brokerage firm.
(Also read: Where to open your Demat & Trading account?)
Step 3: Start investing
Once you’ve set up your trading account and got enough investing knowledge, the last step is to actually start investing. For beginners, an easy approach to find companies to invest in by looking into widely recognized publically traded companies in India. (They are also called blue-chip stocks). Just look around and you won’t find it difficult to search for companies.
From toothpaste, hair oil, edible oil, shampoo to cars, banks, shoes, clothes, petrol pumps etc, everything has a company behind it.
- Automobile → Tata Motors, Maruti, M&M, Ashok Leyland, etc
- Banks → ICICI, Yes Bank, HDFC Bank, Axis Bank, SBI, IOB, etc
- Personal care → ITC, Colgate India, P&G India, Dabur, etc
- Shoes → Bata, Khadims, Shree leathers, etc
- Petroleum → HPCL, IOCL, BPCL, ONGC etc…
You have grown up while hearing the names of these companies. Why not study them and invest? And after you’re comfortable in researching these companies, dive into mid and small-sized companies or hidden gems, which are capable of giving high returns.
— Steps to Buy a Stock in Share Market
- Once you’ve picked the company, log in to your brokerage account (Say Zerodha).
- Select the Scrip/Company that you want to buy.
- Enter the no of quantities of shares that you want to buy and select ‘MARKET’ order.
- Place your order.
- Check the order book to confirm the execution of buying.
Before parting, let me give our final advice. Start investing as soon as possible, even with the smallest amount that you have. The time is in your favor when you start investing early (Ever heard of the power of compounding?). And this simple step to start early can help you accumulate a lot of wealth in the future.
That’s all for this article on How to buy a stock in Stock Market. Feel free to leave a comment if you have any questions. Take care & happy investing!
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Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting