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💻CONTENTS :

INTRODUCTION
1. Prerequisite Documents For Starting Investment In Stocks
2. Demat Account
3. Trading Account
4. Linking of Bank Account

HOW TO START

STARTING FROM THE PRIMARY SHARE MARKET

MOVING TO THE SECONDARY SHARE MARKET

TRY TO DIVERSIFY AND REDUCE YOUR RISKS

CONCLUSION

INTRODUCTION

First of all, let’s have a basic understanding about what a stock market actually is. A stock market or a share market is a place where shares are publicly bought and sold (also called exchange of shares). A share is a document that indicates the part of your ownership in the company, and you have an option sell this document to others. A share market is known as a place where buyers and sellers meet for this exchange of documents. Earlier in time, the shares were issued physically to the public in the form of a signed document. But now in the modern world where the technology is so advanced and manual intervention is negligible, shares are issued, stored and traded in electronic form only. To facilitate the exchange publicly, a proper market place has been developed for investors to purchase and sell their shares on. Now let's address investing in stocks for beginners.

HOW TO START

A key element inside a share market guide for beginners is actually the alternative ways by which one can invest money in stocks publicly listed on the market. For this, the following requirements are necessary:

1. Prerequisite Documents For Starting Investment In Stocks

• Your PAN Card
• Your Aadhaar Card
• Your name on a canceled cheque from your active bank account
• A proof of your residence based on a list of documents that have been accepted by your broker, depository participant, or bank
• Documents detailing that you earn an income
• Passport-sized photographs of you

2. Demat Account

3. Trading Account

4. Linking of Bank Account

These days you can find two in one account that serve as both a Demat account and a trading account. Some brokers also combo kind of account where one can trade directly from their bank account and store their shares and securities within the same location.

STARTING FROM THE PRIMARY SHARE MARKET

If you choose to invest in the primary share market, you can do so through an initial public offering or IPO. For that you will require a Demat account to hold your  shares in electronic form as well as a trading account so that you can apply online. In some of the cases, you can also apply through your bank account. Based on the response of market to the IPO, a selected number of shares will be allotted to you as decided by the company. After all the IPO applications are received, the company counts the applications, shares are allotted to the subscribers based on demand and availability.

It's quite simple to easily apply for an IPO through your net banking account via a process that is called Application Supported by Blocked Amount (ASBA). As per this process, if you have applied for shares of ₹1 lakh, this amount will be blocked into your bank account rather than being sent on directly to the company. Once your shares are allotted, the same amount is then debited from your bank account with the balance being released. All IPO applications need to compulsorily follow this procedure. Once shares are allotted, they're listed on the recognized stock exchange, and you'll be able to begin trading them within one week.

MOVING TO THE SECONDARY SHARE MARKET

The secondary market is what's typically named as a a share market or a stock market. This is the market where all the action among investors of purchasing and selling stocks is. To invest inside the secondary share market, you need a Demat account which should be linked to your regular bank account.

1. When it comes down to investing in stocks for beginners on the secondary market, it’s crucial to open a demat and trading account using one’s linked banking account.
2. Second step is to log into that trading account.
3. Then to move forward and choose the shares that you simply wish to sell or buy.
4. You should make sure that you've got the requisite amount of funds in your account which helps you to buy the shares. Alternatively, if you want to sell, you must ensure that you have the right amount of shares before you select to sell.
5. Next, decide the price at which you want to buy a share versus sell it.
6. You have to wait for the buyer or seller to reciprocate the same request. Complete your exchange transaction by transferring the money/shares and you will receive money/shares.
7. Although it can appear somewhat complicated to newbies, but as detailed above, the process of investing in stocks for beginners is sort of simple. Further it's very important to keep in mind the investment horizon and financial goals before they jump into stock market investing.

TRY TO DIVERSIFY AND REDUCE YOUR RISKS

Diversification is considered to be very important part of investing. In a nutshell, by investing in many assets, you reduce the risk of one bad investment hurting the return of your overall investment. For example if I invest all my capital in single stock or stocks from same industry and that does not perform well, I am bound to suffer losses. On the other hand if I invest my capital proportionately in many different types of shares, My capital will be more secure as, if one stock’s bad performance will get compensated by other good performing stock. There is a popular saying that "don't put all of your eggs in one basket." In terms of diversification, the greatest amount of difficulty in doing this will come from investments in stocks. As mentioned earlier, the costs of investing in a large number of stocks could be detrimental to the portfolio. With a Rs 10,000 ($133) deposit, it is difficult to have a well-diversified portfolio, hence you may need to invest in one or two companies (at the most) to start with. This will also increase your risk in starting. This is where the mutual funds or exchange-traded funds (ETFs) come into picture. Both types of securities have a large number of stocks and other investments within the fund, which makes them more diversified than a single stock. As per the functionality of Mutual funds, every single rupee added by you gets invested into the range of companies which the Mutual fund scheme proposes. Hence you can start with very small amount as low as Rs 500 ($6) for instance. 

CONCLUSION

It is possible to make investment even if you are just starting out with a small amount of money. But It's more complicated than just selecting a right investment and you have to be aware of the limitations that you face as a newbie investor. Since there are many companies providing investment and broking services, you will need to decide on which broker you would like to open an account with. You'll have to do your homework to find the minimum deposit requirements and then compare the brokerage/commission charges of various brokers. There are chances that you are not able to cost-effectively buy individual stocks but still be diversified with a small amount of money.

Thanks a lot for reading till the end. I hope this article was very helpful!

Meaning of Insurance 

Insurance simply works as a safeguard from uncertain financial losses. It is a sort of risk management, primarily used to hedge against the danger of a contingent or uncertain loss.

Concept of Insurance came into existence when people suffered huge losses due to one or more events which are not under the control of Individuals.

Today we get offered by number of companies for buying Insurance Policies whether it is a life insurance policy, a vehicle insurance policy or of any other kind. 

How Does Concept of Insurance work?

As we are aware that when we buy an Insurance Policy, We have to pay a fixed sum of money on intervals which is known as Insurance premium. Companies sell these policies to number of customers with assurance to compensate for damages and collects premium on monthly, quarterly or yearly basis. This is also called pooling of funds. While entering into such contract of Insurance, Company analyses the current situations and risk factor involved with the insured. Higher is the risk factor involved, Higher will be the amount of premium charged by the company. In this way company collects premium from all its customers. Applying basic permutations and combinations it is less likely that some customers incur damages of nature for which the company is liable to compensate as per the terms and conditions of contract. 

The customers which incur damages are compensated by the company. In this way company continues to book the insurance premium received as its income and book the compensation or damages paid to customers as expense in its income and expenditure statement.

An entity which provides insurance is known as an insurer, an insurance company, an insurance carrier or an underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known - relatively small - loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship. 

Do we Really need insurance?

Many Economists and consumer advocates generally consider insurance to be worthwhile for low-probability, catastrophic losses, but not for high-probability, small losses. Because of this, consumers are advised to select high deductibles and to not insure losses which would not cause a disruption in their life. However, consumers have shown a tendency to prefer low deductibles and to prefer to insure relatively high-probability, small losses over low-probability, perhaps due to not understanding or ignoring the low-probability risk. This is associated with reduced purchasing of insurance against low-probability losses, and may result in increased inefficiencies from moral hazard.

But insurance are very important part of our financial security. In the era of  unknown viruses attacking the mankind like Covid-19, Health Insurance and Life Insurance have been a relief for people who lost their families in crisis. Insurance is a must in order to be financially secure in case of  unexpected adversities. Vehicle insurances have made mandatory by the  government as a major step towards securing individuals from unwanted financial losses.

How Insurance Companies got effected due to Covid-19? 

Insurers also may face bigger claims coming from pandemics in the future. It was estimated that business interruption losses from Covid-19 would result in over $100 billion in insurable claims; however, those losses have not yet come to fruition. However, businesses will likely ask for more certainty in their coverage of unforeseen, pandemic-driven economic interruptions. 

The macroeconomic backdrop has also been a challenge. An era of low interest rates has cut into the profitability of insurers’ fixed income portfolios, causing stagnant investment income and major restructurings of the industry's leaders.  

Thanks a lot for your patience and reading this article till the end. I hope you got some knowledge out of it. For more articles like this you can follow my blog. Till then Take care and See you in the next blog.     

-
Gagan

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