Indian Share Market is one interesting place. The Bombay Stock Exchange and The National Stock Exchange have the largest number of listed companies in the world. However, only 2% of Indian household savings go into Equity (Shares) Investments. Clearly, not everyone is aware of the important things to keep in mind while investing in shares.
· Are you a short term investor or a long term investor?
The first step is to determine if you would invest for a time span of a few months to an year (Short term) or for more than a year (Long term).
· How much would you invest?
That's a tough one. How much to invest? We either invest too much or too little. Ideally, it shouldn't be more than 25% of your liquid net worth. Btw Liquid Net worth is: Cash or cash equivalents - Short term liabilities. Say the value of your liquid assests is Rs 12,00,000 and your short term liabilities is Rs 5,00,000. So your liquid Net Worth would be (12,00,000-5,00,000) = 7,00,000 and 25% of this would be 1,75,000/-.
According to me, this is the ideal amount of investment. Not a single rupee more than this should be invested in share market.
· Can you identify stocks?
People interested in share market are updated about the changing rates and fates of stocks. But if you cannot identify stocks or have no time for it, Systematic Investments Plan (SIP) managed by mutual funds and brokerage houses plays the role for you. However, the choice of brokerage house is a crucial decision too.
· No Cash
This is the era of NEFT and internet banking. DO NOT hand cash over to anyone for investments in shares. The transaction of money is account to account only, and that too through banking channel only.
· Who Do You Approach?
A DEMAT and TRADING ACCCOUNT should be opened only with a registered member of a recognized stock exchange. There are other stock exchanges in India but not every stock exchange is registered with the regulator.