Trading and investing are not only about the numbers game or how good you are at predicting the stock prices. Succeeding in the stock market also requires a clear vision, accurately defined goal, and the correct mindset aligned with those goals. You need a demat account to invest your money in share market.
Let us see what should be your first steps before stepping into the investing/trading world :
- First, you need to be clear about what your goals and expectations are. You need to decide why you want to start trading/investing in the stock market before putting your money in the position of risk. Have a clear vision and set realistic goals for investing. Be clear about the amount of time you are willing to dedicate and whether you want to actively trade, become a long-term investor or a part-time trader. Also decide whether you want to do delivery trading, margin trading, futures and options, intraday or any other type of trading.
- Next, before approaching a broker to open your demat account, you should spend some time on doing research about the brokers themselves.Look for the brokers who have a strong presence in the market. See their customer reviews on various platforms and their rankings as compared to their competitors.
- Look at whether the services provided by your broker are fulfilling all your trading needs or not. For example, if you are looking for margins to do delivery trading, then see if that particular broker provides that service or not.
- Next, look at the different types of fees which the broker may charge you. These fees include brokerage, account maintenance charge (which can be annual or quarterly), charges for delivery of shares from the Depository Participant (DP), charges for margin trading, interest on margin trading, etc.
- After this, you need to apply for opening a trading and a demat account by filling out the application form. You can apply to open trading account online also along with the demat account. Fill this form carefully as incorrect details may lead to rejection of the application.
- The next step will be to get your documents verified. These documents include your Permanent Account Number (PAN), Aadhar Card, Passport size photographs, and an Identity proof such as Driving Licence or bank passbook. It is always recommended to keep your documents updated beforehand to avoid any inconvenience or rejection of the documents. Also make sure that the details entered in the application form are the same as the details mentioned in your documents.
- After the verification is completed, you will be asked for the KYC (Know Your Customer) process. This process is helpful in double-checking if the person applying for the application is you or not, which helps to prevent money laundering cases. This can be In-Person Verification where your biometrics will be verified by using a fingerprint scanner. It can also be an eKYC process (if you open demat account online) where you will be asked to send a short video of yourself according to the guidelines mentioned by the broker.
- The next step will be to sign the Power of Attorney (POA). POA gives your broker the rights to sell your shares on your behalf. Although it is not mandatory for the brokers to ask for the POA according to the guidelines of Securities Exchange Bureau of India(SEBI), many brokers ask you to sign the POA at the time of account opening. This is to avoid any inconvenience at the time of selling the shares. If your broker asks you to sign the POA, then go through the terms and conditions of it very carefully to avoid falling prey to frauds which may happen due to the misuse of POA by your broker.
When all this is done, your demat and trading accounts will be opened, and then you can start your trading journey.