How to buy your first stock?
Buy your first stock
Introduction
These days people are getting attracted to equities and other related instruments viz Mutual Funds, ETFs, etc. However, multiple factors are held responsible for under penetration of Indian Stock Markets viz,
- Various Scams in the past - Harshad Mehta Scam, Ketan Parekh Scam
- Perception of equating SM with Gambling
- Low Risk-taking culture in our nation
- Lack of financial knowledge base
- Fear of Losing your hard-earned money (FOLO)
- Volatile nature of Returns
- Fixed Income schemes being more popular with guaranteed returns
- And much more….
In India, only 2.5% of the population has exposure to the financial markets (Source: FE) whereas the percentage is as high as 90 in developed economies. Here in this article, we will look at how to get started in equity and how to buy your first stock. However, what to buy and when to buy, what all research is to be carried out will be discussed in a separate series based on your queries and my general understanding of the basic requirements.
How to select a Demat Account and the brokerage charges associated with it?
Thanks to growing internet penetration and a tide of smartphones, a lot of brokers have come up with immense ease and simplicity in providing a Demat account. One must choose the broker based on the brokerage costs, online software/services, nomination, charges among other factors. Various brokers to choose from are many like Zerodha, Upstox, 5 Paisa, HDFC Securities, ICICI Securities, Motilal Oswal, IIFL etc….there is a long list of them :)
If you ask me, I have my demat with Zerodha and Upstox, both of them. Yes, an individual can have more than one demat account. Both of them provide charting software free of cost. In case you find your passion in the market like me and enter Technical Analysis at a later stage, you will find the free charting software as a part of your life. Not only that, you can also invest in Mutual Funds, get consolidated tax reports, set alerts for stock prices, and much more free of cost.
Coming to the brokerage of buying stocks - Frankly speaking, I am deliberately skipping the cost of Intraday trading, Futures and Options as I believe many first time buyers won’t buy stocks for trading in the market. So, if you buy a stock for the long term, you have to pay ‘0’ rupee to Zerodha. The STT (Security Transaction Tax) is 0.1%, transaction charges are 0.00325% for NSE and 0.003% for BSE, GST is 18% on brokerage + transaction charge, and SEBI charges are 10/- per 10 crores (no one is going to do this much initially :))
Let us take an example: If I buy a stock for 100/-, the total amount I need to pay to Zerodha will be as follows:
So, all in all you pay 0.1/- for 100/- of a stock purchased on Zerodha for the long term. No wonder, it is the largest brokerage house of India in terms of active client base. And, I am not getting paid for its promotion.
How to open an account?
In this section, I will simply give you a link to Zerodha/Upstox page and you may also feel free to check the brokerage charges with any other broker in case you do not want to have your account with the above mentioned two.
Here is the link for Zerodha Account Opening process - Click Here (https://zerodha.com/open-account?c=XM0863)
For Upstox Account - Click Here (https://upstox.com/open-demat-account/?utm_source=refernearn&utm_medium=referral&landing_page=ReferAndEarn&f=AUGQ)
Once you sign up with your Mobile number, you will find various steps which will guide you through automatically.
Once you get your User ID and Password for the account, you are ready and have successfully taken the first step towards your financial independence through passive income generation. You earn while you sleep.
Later Stages:
Shortly thereafter, we will delve deeper into this ocean of Stock Markets which will open a plethora of opportunities with more than a thousand listed stocks. And do feel free to let me know your queries…..
Till then, see you soon.
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