How to choose the right stock broker?

For investments in stocks, one should have broking account. This can be opened at any brokerage house. Hence one should take almost care with whom you are opening your account with. This impacts your overall returns, ease of doing business with and increasing your wealth in long run through proper guidance and research.

How to choose the right stock broker

There are two types of brokers

 

A) Full service – They provide a variety of services like buying, selling, IPO investments, demat account opening, research, advice on market trends, retirement planning, tax planning etc. They charge brokerage as a percentage of trade value and are bit expensive compared to discount brokers.

 

B) Discount – They provide basic necessary facility services like buying and selling. They charge brokerage on basis of per trade and are cheaper compared to full-service brokers.

Must Read: how to select the best share broker in India?

 

Before hiring services of any type of brokers, you have to decide how often you will trade. If you are investor and trade very rarely than take services of the full-service broker but if you trade very frequently than better go for a discount broker.

 

Before finalizing any broker there are certain points you should analyze. One should also have Indian stock market overview before analyzing the broker.

 

  1. Stockbroker reputation

If the stockbroker is highly experienced and has up to date knowledge of present market trends and inner working, you will be saving quite a few bucks in a long run. To list these types of brokers you can go through official website of SEBI and few stock investment websites. One must also see any issues of complaints or check on their reputation from personal experience of other investors in the market who are/were in contact with the stockbroker.

 

  1. Brokerage fee

Fees like the commission, account opening, transaction, maintenance, transferring money, etc should be taken into account and should be compared with other brokers along with services in each category provided. These fees are associated while working with the broker. For few transactions per month/year, one should opt for brokers who have low maintenance fee and for very frequent transaction per day/month one should opt for a low transaction fee. These fees will impact your overall returns.

 

  1. Technology and software tools

Brokerage firms are increasing capacity and speed by using advanced technology. They are also using these technology models and developing such software tools for market research which gives them more and more perfect trends and up to date information on market conditions to take better and reliable decisions. Choosing these types of brokers to help you make an informed decision and because of speed, real-time executing of your trade will be possible (especially for day traders).

 

  1. Your investing type

If you are a day trader, where your trading volume will be high, a flat fee on transactions which are low should be preferred. Better choose discount brokers.

If you are an investor, who holds his script for a considerable period of time, low maintenance fee brokers should be preferred. Better choose full-service brokers.

 

  1. Local office

If you prefer to talk to an advisor, face to face or on phone for buying/selling your script see to it that brokerage firm has an office or a franchise in your city/town. But if you are comfortable with doing things on your own then local office or franchise does not matter.  Certain brokers have online facilities can be used from anywhere in India.

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Top 4 Myths And Facts About Indian Stock Market Exposed

With reference to the stock market, one can say there are group people who are very much involved and dependent on the stock market, day in and day out. They earn their bread and butter from the stock market. Their whole family depends on the earnings they get from the stock market.

Then there are other groups of people who invest in stock market to increase their wealth. Their principle income is either through jobs or business. For them, share purchase is just an investment vehicle.

Apart from these groups, there are others who do not have much knowledge about the stock market. They think it is a mysterious place, where there is a lot of shouting going on and sometimes there is a lot of jubilation or despair going on. People shouting here and there and signaling one another. The common man is unaware of what is going on inside the stock market. Let take a look at Indian stock market overview and myths surrounding it.

Myths and Facts

  1. Place only for the rich and famous

This is one of the most typical myths that a stock market is a place where only rich and famous personalities put their money. Or only those people who have hordes of money can invest in stock market. Once all your paperwork and registration is complete then you can start purchasing stocks, which you can sell it at an appropriate time to make a profit. Share prices are in a range from few rupees to thousands. Similarly, the quantity that you can purchase is from one share to hundreds to thousands to lacs depending on your pocket.

One can start purchasing shares with an as small amount as one hundred rupees and can purchase any day whenever one wishes during working hours. There is no minimum fixed level for stock investment.

  1. Nothing more than gambling

This is one of the biggest myths that keep investors at bay from approaching stock market. This notion persists with investors or the common man who have no knowledge regarding the difference between gambling and the stock market.

Gambling is pure luck game. Luck can favor you sometimes but cannot favor you all the time. A stock market is about speculation. Speculation is an investment in real estate or stocks or in commodity, in the hope of gain but with a risk of loss. Your ability to purchase/sell right stocks at right time and at the right price so as to profit or loss from it. Luck has virtually no role to play. One can also minimize risk to an extent by taking into consideration certain points. One can take calculated and timely decisions so that risk of loss is less and gain from profit is more.

It is true that many people have riches to rags story in the stock market. It was not because of being unlucky, but because of greed and over expectations. Similarly, it is also true that there are rags to riches story in the stock market. It was not because of being lucky, but because of patience, calculated and timely decisions.

  1. High price shares will fall and low price shares will rise.

This is also one of the widespread myths that share price which are high today will one day fall and share prices which are low today will one day rise. Actually, those share which are overpriced/underpriced because of rumors, misjudgment, and other things, will on correction of the market will fall/rise. But if a company is potentially strong its price will not fall and those company which is weak, its prices will never rise.

Many factors and ratios are considered while evaluating company’s share price. There were moments when Sensex was at 8000 pts (also at different points) and people said the bubble will burst. But you know where it is today.

  1. Trading can be done without understanding.

There is a myth that stock trading is nothing but buying and selling of shares. People do jobs or business like an accountant, carpenter, plumber, designer, etc.  They gain requisite knowledge over a period of time. While on learning path they face difficulties which they resolve and learn from their problems and shortcomings.

Same thing applies in the stock market. Little understanding is not enough for trading. One does gain knowledge when one is involved, what to be done and what not to be done, observing business tricks of the trades, logical reasoning, applying common sense, calculating, studying patterns and charts, analyzing financial statements, handling difficult situation, figuring out what went wrong and how to correct it and move ahead. This way trading will be more successful and profitable.

How Does Stock Market Work?

Every person wants to know “how the stock market works”, especially the beginners. The working process of the stock market is based on buyers and sellers, who called traders, who bid on stock shares. This is a small part of the ownership of a public corporation, in which the stock prices show investors’ opinion about the company like a company will earn the profit in the future or not. The traders, who think that the company will do well in the future buy the share of that company while those who believe that current share price of the company will deteriorate go away. Sellers want to get as much as possible more for each share what they paid for it in the stock market.

Stock Market

In the stock market, the buyers always try to buy shares at the lowest price so that they could sell it later for more profit. The traders cannot trade directly on the stock market, so they hire a broker-dealer to execute the trades in the stock market.

A stock market or stock exchange is a common term for a forum that deals with the securities traded on various exchanges. The complete procedure of stock market is done under the provision of the Securities & Exchange Board of India (SEBI). Trading is an art that grows step by step with experience. Ups and down always occur in the stock market. Therefore, if you are a beginner then must be aware of it before investing in the stock market.

Advantages in stock market

To gain more profit of financial capital, companies sell stocks in the stock market. Issue initial public offering (IPO) is the first step of this process in the stock market. After issuing IPO, there is no privacy and investors can evaluate the strategy and profit of the company quarterly.

There are many private ways to get financing through personal loans, private investors or bonds, which are publicly traded loans. The main advantage of stock versus bonds is that a stock does not require a monthly repayment of interest. Investing in the stock market is a great way to ensure that your investment is better than inflation.

Trends in stock market

If investors feel that the economy is growing, then they should invest in the stock market because a strong economy helps companies to grow their income. It usually happens with the expansion of the business cycle. The stock market is also known as a bull market.

Must Read: How to earn regular second income from stock market?

If investors think that the economy is slow or stable, then they can invest in bonds, which is a safe investment. The reason for its being safe is that bonds give a certain return on the life of the loan.

If there is a danger to the global economy, investors also can go towards gold. Some companies offer gold mcx tips to the investors. It happens in the stock market when the price of the stock falls by 10 percent or more.

Going up or down of stock market is very common therefore you should keep in mind that these are general trends. There are no hard and fast rules to accurately predict the stock market trend.

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How to Make Money in Indian Stock Market?

You might have heard that there is a lot of money in the stock market and it has been earned by many people but many people are deprived of taking advantage of this, they are not fully aware of the profit in the stock market. There are many people who are making a lot of money by knowing the secret of earn or making money in the stock market. There are two types of personality that play in the stock market. The first type is basic investments and another type is of speculators.

make money in Indian stock markets

There is always fluctuation in the stock market, which creates confusion in mind of the people. Here you can earn money a day and lose it on the next day. That is why a perception of making regular money gains from the stock market is fairly incorrect. There are some stock advisory companies which assist newcomer in the stock market .There is no set rule that could help you earn so much profit every day. Yes, but you can take some route to stay in the stock market for the proper benefit, which is given below:

Use evaluation techniques

It is very important to know the basic stock evaluation techniques to make money from the stock market. In the period of its fundamental power and in terms of its pricing, the stock should be evaluated. Before booking any stock, the investors should ensure that it is not overvalued. A majority of people lose money in the stock market because they buy stocks which are overvalued.

Practice long-term investment

In order to earn a regular profit in the stock market, practicing long-term investment in stock is a good option. This type of investment is more reliable and can ensure the long-term benefits or returns. Long-term investment stops people from thinking about the speculative method. A company that is capable of producing stable long-term returns is one of the great stocks. If a company is good for long-term purchasing, then it helps in making a fundamental analysis to help investors.

Confirm short-term trend of stock prices

It can be done in various ways. The easiest way is to open the price chart by looking at the value of the stock market and see how the cost of shares has changed within the last 6 months. Always note or write down that the price has dropped from where to where. You are able to check simple moving averages of the stocks, after looking at the price chart.
Verify strong fundamentals of the company

Must Read: How to invest in share market in India?

Fundamentally strong stock represents its different variety of features based on which you can rate them as quality stock. A fundamentally strong company often shares its dividends to shareholders with profits. If a company that has been giving constant dividends to its shareholders over the last few years, it means that it is a great fundamental. Dividend yields can be considered excellent in the range of 2% to 3%.

Evaluate stock prices

You can easily check the movement of share price has been made in the last 2-3 years. Let’s assume that the price of the stock in the year 2007 was 35 rupees and it has reached 50 rupees in three years of time, which means that the company’s trend is increasing. It is essential to check whether stock prices have touched higher prices/overvalued levels or not. It can be known in different ways also. You can start it by comparing the price of the stock with your book value.

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An Overview of Indian Stock Market

Welcome to the Indian stock market. There are two types of investors, one who has full knowledge about the Indian share market and other who are fresher in this field. India seems like a small stock market compares to the United State but on closer examination, you will get the exact same things that you expect from any emerging stock market. Here, we are providing the overview of the Indian stock market that will help investors to get in-depth knowledge about the Indian share market.
Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)
Most of the share trading in the stock market is done in two stock exchanges. One is the Bombay Stock Exchange (BSE) and another is National Stock Exchange (NSE). The BSE has existed since 1875. On the other hand, the NSE was established in 1992 and started trading in 1994. Both exchanges BSE and NSE have the same trading pattern. Almost all the important companies and organization of India are listed on both the exchanges.

1. Trading System

Trading in BSE and NSE is done by an open electronic limit order book, in which the order is matched by the computer. There are no experts or market makers and the whole process is order-driven, which means that the orders are placed by the investors, which automatically match the best limit orders. As a result, the buyers and sellers always remain anonymous. The main advantage of the order driven market is that it brings extra transparency by showing all the purchasing and selling orders in the trading system. However, there is no confirmation or guarantee of execution of the orders in the absence of the market makers and specialists.

Indian stock market

2. Settlement Cycle and Trading Hours

The T+2 rolling settlement is followed in equity spot markets. It means that any business or trade that takes place on Monday will be fixed by Wednesday. The trading on the stock exchanges takes place Monday to Friday, between 9:15 am to 3:30 pm, Indian Standard Time (+ 5.5 hours GMT). The delivery of shares should be in dematerialized form and both exchanges have its own clearing house, which serves as the central counterparty and considers all settlement risks.

Must Read: How to control investment loss in share market?

3. Market Indexes

There are two very famous Indian market indexes named Sensex and Nifty. The Sensex is the largest market index of shares. Another index is the S & P CNX Nifty. This includes shares of 50 firms listed on the NSE, which represent 62% free-float market capitalization of the index. It was built in 1996.

4. Securities Market Regulation

The entire responsibility of the stock market development, supervision and regulation are the Securities and Exchange Board of India (SEBI). The SEBI was formed in 1992 as an independent authority. Since then, Securities and Exchange Board of India (SEBI) has constantly tried to make market rules in line with best market practices. SEBI is well known for imposing the penalty on participants of the market if rules are breached by them.
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