Many people take to the stock market in a big way. They want to make money and why not? Everybody including the banks, big businesses, and governments do business there. The market turnover in India is Rs 543,210 on an average. Considering such huge sums involved it is natural for investors and traders to keep figuring a way to make money regularly.
Mechanism is simple
Making money through the stock market is easy. It does not take much brains to figure out the mechanism. You buy cheap and then sell it high and make a profit on the difference. The value of the stock and shares however depends on the market movement and the policies of the government. If one misses the government announcement, then they are liable to bid wrong on the stock.
To buy and sell shares you need a trading account. This is the licenced platform from where you can buy and sell shares and equities. The person who trades online in the stock and commodities market needs a demat account to keep track of everything. The demat account is like the bank for the user. He or she keeps all the stocks and commodities in the demat account in dematerialized form, that is online.
Use only spare money
So, how much money can a person make? There is no limit to the money you can legally make on the market. In the same way, there is no stopping you once you begin to lose money. It is easy to lose one’s entire wealth on the market. For this reason, there is one rule that all the traders follow. You must only trade with the money you can afford to lose. If you have money in the bank for your personal expenses, for your family expenses, for your conveniences, and some extra cash then you can use the extra cash to trade. But, you must never touch the other money.
Choose a trading broker to invest your money. This person will help you manage your trading account, your demat account, and help you manage the fees. So, you can instruct the broker to buy some share at some time and pay the fees for the same and he will do it for you. You can instruct to buy the shares at any time, even the next year. But, you must have money in the bank to pay his fees.
Types of brokers
There are two kinds of brokers – discount brokers and full-service brokers. The full-service brokers will provide all services but will charge a fixed rate on all the transactions you do. This might be 0.5% of the transaction amount. Consider you buy or sell shares worth Rs 20,000 and the share worth is Rs 496, then you owe the broker Rs 496. The discount broker is not like that. He will not offer any extra service other than offering you the account to operate your online transaction. He charges a flat fee that is usually Rs 50 to Rs 100.
This is low compared to the fee that the full-service broker charges. So, beginners and people who trade insignificant amounts will use the services of the discount broker.
