How to Buy Shares Online? Invest in Stock Market

Investing in shares is an ideal way to grow your wealth, and it is getting increasingly popular among the Indian public. And now that you can buy shares online, from your smartphone or laptop, it has become even more alluring. However, not many people know how to buy shares online and the factors to look out for.Read on to know how to invest in the share market online and improve your financial standing. Also Read: What is the Difference Between a Stock Market and a Stock Exchange?

Before you can buy shares online, there are several steps you need to complete to become eligible. This guide can help you understand how to invest in the stock market online. Also Read: What is Fair Value in Stocks?

Get a PAN card

Before starting your stock market investments, the primary prerequisite is a 10-digit PAN. This is because, per a government mandate, anyone wishing to execute financial transactions in India must have a PAN card registered to their name, and buying or selling shares qualifies as financial transactions.

Find a broker

Even if you want to buy shares online, you cannot do so without an intermediary; you will need the services of a broker or brokerage platform registered with the Securities and Exchange Board of India (SEBI) . Brokers can be individuals or agencies but be sure of their credentials and reputation.It is important to note that brokerage fees are involved and can either be in the form of a flat fee or a certain percentage of the total transaction value. Browse through a few available options keeping in mind the fees involved and your investment objectives to make an informed choice when selecting an investment broker. Also, check the range of securities the broker offers alongside the stocks before finalising one.

Open a Demat and trading account

The next necessary step is to open a Demat and trading account. You must have both these accounts registered in your name. A trading account is needed for executing transactions, while a Demat account stores your shares electronically.To open the Demat and trading accounts, you must submit specific documents and complete the in-person verification process with the platform with which you are opening the accounts. Once you complete this registration process, you will receive account numbers for your Demat and trading accounts and a User ID through which you can access and manage your accounts online. Also Read: Trading Account Vs Demat Account

Understand the role of a depository participant

A depository connects shareholders with companies listed on stock exchanges and facilitates the transfer of shares. The depository can be a broker, a financial institution or a separate entity that provides access to investing in securities in the market. Two SEBI-registered depositories exist in India - the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).

Link your bank account

You must also link your savings or current bank account with your trading and Demat accounts. The money to buy shares will be sourced directly from your bank account. Similarly, when the shares in your Demat account are sold, the money is transferred to your bank account.

Identifying the right shares

The process of buying the right stocks and shares starts with studying stock reports and analysing them. If you do not know where to begin, your broker can help in this regard.

Obtain a UIN

If your investment plans involve a capital amount exceeding ₹ 1 lakh, SEBI mandates you to get a Unique Identification Number (UIN), which helps maintain a Market Participants database. You can get your UIN through Point of Service representatives of National Securities Depository Limited (NSDL).Once you have completed the steps mentioned above, you will be set up to start your investment journey in the stock market. And that leads to the next question: how to buy shares? Also Read: Empowering investors: Understanding the importance of brokers in stocks

After setting up your purchases, the next step is identifying the shares you want to buy. Once this has been done, place an order with your broker, who will raise a purchase order with the stock exchange concerned. Subsequently, the exchange will match it with a corresponding sale order.After completing this transaction, you can view the stock units in your linked Demat account.

There are a few things that you, as an investor, must know when learning how to buy stocks online and how to invest in the share market online. These include:

P/E ratio

Referred to as the Price-to-Earnings ratio, this is a measure of the company's current share price relative to its earnings per share. This is also known as earnings multiple or price multiple. Analysts and investors use the ratio to determine the relative value of a company's stocks and whether its shares are over-valued or under-valued when compared to its earnings.It is important to note that stocks from different sectors exhibit different P/E (valuation) ranges, which means one P/E cannot be the standard yardstick for all stocks. If you want to check if one stock price is attractive or not, look at its historical P/E data; if the current P/E is closer to the lower end of the range, it indicates that it may be a good investment opportunity. Also Read: What is Risk-to-Reward Ratio? How Is It Calculated?

Stock's beta

The stock's beta is the degree of volatility a stock shows in relation to the market index. A beta value of one indicates that the stock's volatility level is in line with the overall market, while a value over one means the stock has a volatile price movement and that it could either increase or decrease. In other words, this would be a high-risk stock. A beta value of less than one would be ideal for new investors with a low-risk appetite.

The company

You also need to investigate a company before buying its stocks online, so check out the industry in which it operates, its performance in the past, and its current profits, and try and gauge how long it's good run can continue from its fundamentals and industry performance.

Dividend payout

Companies whose dividend payouts are inconsistent are in their growing phase and can give high capital gains. But stocks of such companies can be high-risk.Consistent dividend payouts signify a steady company offering lower but steadier capital gains.

Investing in stocks is a journey that can be lucrative and yet challenging. You need to maintain perspective and not lose focus on your end goal. Market swings are common in stock trading, and one needs to have an appetite for risk and patience to enjoy growth.Also, engaging the services of a stockbroker is mandatory in India if you want to engage in market transactions.