Sharekhan Blog

How To Buy Stocks Online

  • Mar 9, 2024

Thanks to user-friendly digital brokerage platforms online, today, anyone can conveniently buy/sell shares across devices at low costs, thereby creating wealth by partnering into profitable business growth journeys amidst calculated risks from market volatility.

In this article, we will learn the required steps for facilitating online stock buys while outlining key research pointers for prudent company selection and maximising favourable risk-reward outcomes as a mindful investor.

Understanding The Basics of Stock Trading

Stock trading involves buying and selling shares in companies with the aim of making a profit. Each share represents a tiny ownership slice of a company. The stock market is the virtual or physical space where these transactions occur, acting as a central hub for investors worldwide. Investing in stocks offers the potential for significant financial returns, especially for those who invest wisely in companies that grow over time.

Understanding these fundamentals is crucial before launching into online trading, as it lays the foundation for making informed decisions. Learning the basics helps navigate the complexities of the market, minimising risks while maximising investment growth opportunities.

Step 1: Obtaining Mandatory Identification Credentials 

To invest in Indian stock markets, obtaining government-issued identity proofs becomes imperative for broker onboarding and Know Your Customer (KYC) regulatory requirements. Two essential documents include:

PAN Card: The 10-character alphanumeric Personal Account Number card remains a mandatory identity proof for financial market participants issued by the Indian Income Tax department. It carries name, date of birth and photo details.

Aadhaar Card: The 12-digit Unique Identity number issued by UIDAI serves as the second essential personal verification carrying name, address, DoB, photo and biometric data. It establishes the uniqueness of individuals.

Investors must obtain both by applying online through respective portals or common citizen service centres before initiating account openings.

Step 2: Initialising Online Investment Platform Access

With PAN and Aadhaar in hand, investors can approach brokerage platforms to activate their market participation tools:

Trading Account: Operated by brokers, this account facilitates placing buy/sell transaction orders across equities, derivatives or other tradable securities on behalf of the client, analogous to a bank account but for equity markets.  

Demat Account: Like a vault, Demat electronically stores share ownership certificates securely instead of handling physical papers, enabling convenience. Integrates with trading account for stock settlement post order executions.

Top online brokerage platforms like Zerodha, Upstox, Groww, AngelOne and Paytm Money simplify initialising the above accounts digitally through video KYC formalities using Aadhaar & PAN details in minutes from anywhere to hasten access.

Step 3: Funding the Investment Account

Next, registered bank details get linked, enabling easy transfer of surplus capital to deploy into account for buying stocks after evaluating opportunities. UPI, net banking or card networks activate quick, paperless funding routes to take positions on ideas matching outlook soon after analysis. Nominal transaction charges apply on trades across brokers. Account statements capture share purchase settlements transparently post order matching on exchanges.

Step 4: Studying Company Prospects for Informed Decisions

Now, when equipped with market access powered by investment and trading accounts with funded capital, investors must focus towards prudent research initiatives determining rational stock selection matching outlook.

As thousands of listed companies span markets across sectors, evaluating aspects like financial growth consistency, management strengths, industry prospects, and valuation reasonableness helps filter high-quality opportunities for allocating hard-earned capital responsibly.

Factors to Consider to Buy Stocks Online

Approach company analysis by assessing factors like:

  1. Financial Health Metrics: Study trailing revenues, profits, cash flow generation capability, and debt coverage abilities indicating consistency across past business cycles, inferring sustainability of future growth runways to continue wealth creation journeys. Prefer higher earnings visibility.
  2. Management Pedigree: Founders' vision capacity to convert growth into shareholder value creation along with governance philosophy merits attention beyond pure financial Matrix. Skin in the game through promoter holdings reveals alignment incentives driving prudent capital allocation balanced with maturity.
  3. Industry Positioning: Macro level perspective evaluating the addressable market size, competitive intensity allowing pricing power retention over long horizons and disruptions risks mitigation abilities lend insight into corporate longevity and consequent investor prosperity prospect through part ownership.
  4. Valuation Metrics: Rather than peer or historical multiples obsession alone often misguiding novice investors, focus on the range of ratios spanning P/E, EV/EBITDA, and PEG, determining holistic value reasonableness guiding entry-exist timing gracefully without overpaying amid hype or selling prematurely either.

By evaluating such multifaceted parameters and thoughtfully interpreting metrics output, taking balanced calls allocating savings into equity markets online, retail investors enhance their probability of consistent compounding despite surrounding interim volatility swings, thus enjoying the startup-like high reward potential that listed small, mid and large-cap offerings bring to portfolio when associated calculated risks get handled wisely over long durations instead of short sightedness.

Conclusion

Online investing makes participating in India's high-upside but equally volatile stock markets easier than before for common citizens through democratised access. However, mindful success still warrants knowledgeable research initiatives, selecting quality bets and managing risks responsibly. By persevering with discipline and rational temperament, equity markets can create challenging retail wealth and prosperity just like other available savings avenues over time.

Team Sharekhan
by Team Sharekhan

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