Last Updated on 19/10/2020 by Deepak Singla
Often, investing in a stock market comes with the misconception of needing a large bank balance. Due to this misconception, many potential investors are dissuaded or discouraged to start early investment. However, this is not at all the case. One can easily start to invest in the stock market with little money by opening a Demat account. Demat account opening charges are highly agreeable for an amateur investor and it can be maintained with zero balance as well. But more about it later. What is rather important to know is that how can one effectively plan to invest so as to make the best of their investment. There are few things to keep in mind which will help a potential investor in ascertaining the relevance of their goals.
Step patiently into the stock market.
1. Long Term Plans
The first thing to keep in mind before opting for an investment option is to ascertain why one needs it. If you are planning to use the money in the near future, investment plans should be looked upon in the like manner. However, the best thing to do for an investment strategy is to make a plan that will have a long term purpose. This is suggested due to the uncertain global market in which unpredictability reigns supreme. So an investor who has opted for a short-term plan might not foresee the radical turn the market would take against his desire. That is why it is considered safer to go for a long term plan where the ups and downs of the market will be better adjusted by negating each other. For easy investment in the long run, you can open a Demat account, for free or with low Demat account opening charges, and enjoy investment.
2. Disciplined Savings
Based on the goals you have set for investment, it is important that you should go along the road keeping your stock in mind. Since Demat account opening charges are next to nothing, it would be a good idea to start transactions from there as the first step in your savings. A regular and disciplined method of saving is important in this regard. Whether you are investing Rs. 500 or Rs. 1000 per month, the important thing to do is to keep keeping the same cycle of depositing in a fixed manner. This will not only create a rough estimate for your monthly expenses but will keep your expenses planned and will not be an impediment to your investment strategy.
3. Penny Stocks
An investor with a little money must always be on guard regarding penny stocks. Penny stocks are priced low specifically for the reason that the demand for such stocks is not good at all. This is because the company to which they belong may be going under severe loss or on the verge to be collapsed. While chances are they will soar and reap your profit, but one must always be alert about them. With little money, many investors are tempted to buy penny stocks. In the long run, however, the profit to be derived from them may turn out to be nil or even verging on a loss.
4. Diversification in Investments
For those who have recently stepped foot into the investment world with very limited money allocated for investment, the idea of diversification may be very useful. Instead of totalizing your investment in one company, you would do well to channel out your investment money into different companies. Doing this will ensure you maintain stability in front of the volatile market. This is because even if one or two companies go through a crisis, your total shares will not face serious consequences precisely because they are not channeled into one. This method will also help you to cope or balance out your losses. This is the reason why many amateur investors prefer to begin by diversifying their investments. One can invest easily in diverse stocks through their Demat accounts. With low or zero Demat account opening charges, Demat accounts offer the benefit of diversified investments to be included in the portfolio.
5. Learning the Basics
It goes without saying that the most important thing to help you keep track of the investment world is the knowledge of the concepts and terms associated with it. Try to learn more about stock market basics and different terminologies that are at play in the market. Knowing thoroughly about the basics of the investment world will not only add to your better comprehension of the market but will even help in somewhat analyzing the turns the market will take in the near future. You should also know the basic steps for investment, i.e. how to open a Demat account, Demat account opening charges, maintenance fee, and more. Polishing your knowledge on the stock market will help you in remaining updated about your stocks.
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Often times it happens that some shares are priced high and an amateur investor with little money tends to avoid buying those shares. The obvious reasoning behind this is that it is better to buy more shares than the shares which are relatively high in demand because the volatility of the market might make even those valuable shares fall down. However, what usually happens is that when these investors see the returns these high-priced shares are deriving excellent gains they rush off to invest them without giving it a second thought. This trap is to be avoided by you. Rushing in the world of investment usually turns out to be not such a good idea after all. Therefore, it is better for you to invest by assessing your risks, budget, and stability of the said company. Opening a Demat account with low Demat account opening charges shall help you in having more money for investing. Hence, use your money wisely and invest smartly.
7. Opening a Demat account
A Demat account uses the feature of dematerialization in which physical share certificates are converted into dematerialized electronic form. Investors would be much in gain if they start investing through a Demat account. Demat account opening charges are either nil or almost negligible. Moreover, the Demat account comes with many benefits that will eventually help an investor a great deal:
- You can convert your physical shares into electronic form by the process known as the dematerialization. You can also reverse this by the process usually known as rematerialization.
- You can use the shares in your Demat account as collateral to get yourself a loan.
- Dividends, profits, and bonuses are added faster into a Demat account than they would if you deal in physical shares.
- Less expensive to maintain, as they free you from charges such as stamp duty.
- You can freeze your Demat account for a specific time if you want to thereby stopping all the unwanted activities in them.
- Your stock remains safe as they are neither prone to damage nor to loss.
- A common platform where you can hold all your government securities, shares, bonds, mutual funds, etc.
As it is made clear, from negligible or nil Demat account opening charges to the efficiency it provides, a Demat account can play a major role in your investment strategy. The fact that you can access your account from anywhere be it a smartphone or computer enables you to keep track of your shares. Therefore, the chances are you do much well in the world of investments if you keep these tips in mind prior to or while investing.