How do I Buy Shares

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Category: Buy Shares

People like you and me cannot just go to a stock exchange and buy and sell shares. Only the members of the stock exchange can. These members are called brokers and they buy and sell shares on our behalf. So, if you want to start investing in shares, you can do it only through a broker. Every stockbroker has to be registered with the Securities and Exchange Board of India which is the stock market regulator. You can either choose a broker (who is directly registered with SEBI) or a sub-broker (people licensed by brokers to work under them).

The Bombay Stock Exchange directory or the National Stock Exchange Web site will give you a list of brokers affiliated to them. Most of them entertain retail clients. If you want an online broker, you can start by looking at the Web sites of some well-known online players: Share khan, Kotak Securities, ICICI Direct, 5paise and India Bulls.  Gone are the days when shares were held as physical certificates. Today, they are held in an electronic form in demat accounts. Demat refers to a dematerialized account. Let's say your portfolio of shares looks like this: 40 shares of Infosys, 25 of Wipro, 45 of HLL and 100 of ACC. They will show in your demat account. You don't have to possess any physical certificates showing you own these shares. They are all held electronically in your account. A broker, however, is not similar to a DP. A broker is a member of the stock exchange and he buys and sells shares for his clients and for himself. A DP, on the other hand, gives you an account where you can hold those shares.

Periodically, you will get a demat statement telling you what shares you have in your demat account. How to get a demat account. To get a demat account; you will have to approach a Depository Participant. A depository is a place where an investor's stocks are held in electronic form. There are only two depositories in India -- the National Securities Depository Ltd and the Central Depository Services Ltd. The depository has agents who are called Depository Participants. In India, there are over a hundred DPs. Think of it like a bank. The head office, where all the technology rests and the details of all the accounts are held, is like the depository. The DPs are like the branches of banks that cater to individuals.

In order to buy a share, we need to find a broker.  A broker is like a consultant who is an expert in the share market. He has the knowledge of everything that goes on the market and can guide us when we need to buy a share and in which company we need to invest to get the best out of our investment and also helps us not to lose out on our investment in any way. The broker then will give us an application form which we need to fill. The necessary documents need to be submitted- like the PAN card.  And also helps us to open DEMAT account which is an account that is used for trading purposes. This type of account can be used to buy and sell shares anytime we want. According to the number of units or shares we need, he will let us know what is the investment amount required. He will also let us know the rate per unit. He will also give you the options as to where you can invest and how much to invest and how to spread the investments in different companies so that you can get the maximum benefit of your investments.