This blog is designed to answer the top general 50 questions people asked on Google. All the questions are answered in simple bullet points format for easy understanding of the users. This blog mainly covers the questions about equity, share market, and futures and options. After going through all the below questions, a newcomer to the share market will have a basic idea about the share market and how to make money from it.

Open Demat Account

1. What is the share market and how it works?

• Share market is the place to trade the shares of pubic listed companies.
• Companies float shares to the public through an initial public offering (IPO) to raise capital in the Primary market, through investment banks, financial institutions, brokers…
• Then these listed stocks bought or sold on an exchange, these exchange is share market.
• A share market is a secondary market where traders can sell and buy stocks among themselves.
• The stock market works much like an auction house, it enables sellers and buyers to negotiate prices and make trades.
• In the stock market, Investors can sell and buy these stocks among themselves.
• The stock exchange tracks the demand and supply of each listed stock.

2. What is the difference between the share market and the stock market?

• In operation wise, both stock market and share market is similar in operation.
• The difference between the share market and the stock market is, in the share market only shares of the listed companies are allowed for trading but in the stock market, traders can trade any financial instruments like Shares, Mutual funds, Bonds, Derivatives…

3. what is the Demat account?

• A Demat account is an account that is used to hold securities and shares of companies in electronic format.
• Dematerialised (means converted from physical to electronic form) account is the full form of Demat account.
• The purpose of the Demat account is to hold shares in dematerialized form and trade the shares online, through any trading platform provided by brokers.

4. Is the Demat account safe?

• Demat accounts are safe and secure.
• Demat accounts are opened with the NSDL or CDSL, both depositories have their own security measures to protect the holdings of investors.
• All the brokers also take their own security measures to avoide the misuse of Demat account.

5. Is the Demat account free?

• Now most brokers made the account opening free, but need to pay a maintenance fee every year.
• If it is a basic Demat account then there are no charges up to the certain limit of holdings.
• Some brokers charge to customers monthly and some yearly to the customers.

6. Which is better CDSL or NSDL?

• Technically there is no difference between NSDL and CDSL depositories.
• NSDL started in the year 1996 and CDSL started in the year 1999.
• In NSDL, NSE is the largest shareholder and CDSL has BSE as the shareholder.
• Depository charges of CDSL and NSDL are slightly different.
• The revenue source for depositories is the DP charges which they charge during the sell order.

7. What is the stock market?

• A stock market is a network of exchanges used to trade the shares of companies listed on an exchange.
• The stock market is a safe and regulated auction house where sellers and buyers can negotiate prices and trade on the stocks of listed companies or any financial instruments.

8. How can I open a Demat account?

A Step-by-Step Guide to Open a Demat Account

Step 1: Choose the broker on which, we prefer to open the account.

Step 2: Submit Demat Account Opening Form in an online or offline format

Step 3: Fulfill KYC (Know Your Customer) Norms in the portal.

Step 4: Complete the Verification Process.

Step 5: Upload all the required documents in an online format or submit signed documents to the respective office.

Step 6: Get the Demat ID Number from the broker.

9. Can we withdraw money from the Demat account?

• Our money is in the Trading account not in the Demat account.
• We can withdraw money from the trading account at any time, but for some brokers, it will take some processing time.
• To withdraw money customers need to login to the online portal of trading account and select the option ‘funds'( option name vary broker to broker) and select the withdraw funds option in it.

10. Can I have 2 Demat accounts?

• Yes, investors can have multiple Demat accounts
• It is legitimate to have multiple Demat accounts and trading accounts, with different brokers.
• It is not allowed to have multiple trading and Demat accounts with the same broker or the same DP.

11. Is NSDL a govement company?

• Both CDSL- Central Depository Services (India) Limited and NSDL- National Securities Depository Ltd. are government registered share depositories in India.
• The function of both depositories is to hold shares in an electronic form.

12. How do I know if CDSL or NSDL?

• By checking the first 2 digits ( 1^stand 2^nd out of 16-digit) of the Demat account, the account holder can identify, it is with CDSL or NSDL.
• If the account has only numeric character, then it is with CDSL (Eg:1234567812345678)
• If the account number starts with “IN” and followed by a 14 numeric code, then is with NSDL( Eg: IN12345678912345).

13. How to buy shares?

• We can buy stocks or shares through any online stockbroker, by opening an account with them.
• Once we open the account and add funds to the trading account, you can buy stocks through the broker’s trading platform or through the website.
• Other options are directly or over phone trading services provided by full-service stockbrokers.
• Also, we can buy stock directly from the company or through applying IPO.

14. What are the minimum and maximum age limits for opening a Demat account?

• There is no minimum age limit for investors to open a Demat account and invest in the stock market.
• Both adult and a minor can invest in stocks after submitting their respective documents for account opening.
• For a minor account, it must be opened in a minor’s name by the parents or the appointed guardian.

15. What is NSDL DP?

• DP is the short form of Depository Participants, who is an intermediary (Broker) between investors and the depository (NSDL or CDSL).
• NSDL depository provides its services to investors through Depository Participants (DP), who work as market intermediaries.
• All DP comes under SEBI regulations.
• DP is a financial service providing organization.
• DP can be banks, share brokers, custodians in the share market, financial institutions who provide the service to investors.

16. What trading account means?

• In simple language, the Trading account is an account used to trade shares, bonds, commodities…
• A trading account helps investors or traders to trade securities, cash, or other holdings.
• In the share market domain, a trading account is a primary account in 2 in 1 or 3 in 1 account for traders.

17. How do I start a trading account?

Step by step process to open a trading account:

Step 1: Select the stockbroker or firm with whom need to open the account.

Step 2: Compare brokerage rates and other charges for trading.

Step 3: Decide the mode of opening online or offline. Most discount brokers provide offline account opening options.

Step 4: In the online method, fill up the details and upload the required documents. In the offline method, visit the office and submit the required documents.

Step 5: Re-verify all the details and submit, remaining process broker will take care of.

18. Is day trading illegal?

• Buying and selling or vice versa in a single day are called day trading.
• Day trading is neither unethical nor illegal.
• Day trading is highly risky if do it without learning it.
• Day traders should have emotional control to handle the losses, which day trading can bring.

19. What is the share market meaning?

• Share market means a market where selling and buying of share happens.
• A unit of ownership of the company is called Share of the company.
• By buying shares of a company, an investor become the partial owner of the company.
• If the company grows, the value of share also increases and the invested asset will increase.
• Investors will get profit by selling the shares of the companies if it is more than the buy price.

20. How do we buy shares?

• We can buy or sell stocks through an online stockbroker trading platform.
• Once the fund added to the trading account, we can buy stocks through the broker’s trading platform during market hours.
• If it is a full-service broker, investors can buy stock directly from the office or over the phone trading service during the market hour.
• Some discount brokers also provide phone trading services.

21. What are the 2 types of stocks?

• Common stock and preferred stock are the two main types of stocks of companies.
• Common stock is an equity share of a company, i.e a security that represents partial ownership in the company. At the time of liquidation of companies, common stockholders get only whatever assets remain after paying for bondholders, creditors, and preferred stockholders.
• Preferred stock is like a combination of equity and a debt instrument It is generally considered a hybrid financial instrument. During liquidation Preferred stockholder receives the money along as a creditor in the company.

22. How many shares should I buy?

• An investor can buy any number of shares, which traded in the share market.
• About 20 different companies from different sectors are ideal diversification number, advised by most financial experts.
• During the selection of stocks, it is advisable to diversify across industries and sectors.

23. How do I start investing?

• The first step is to open a Demat and trading account with a broker.
• Select the companies that need to invest.
• Prepare financial planning including goals.
• Buy the stocks as per our preference, which will help to meet our financial goals.

24. When should I buy stocks?

• For investment, there is no right time to buy shares, any time we can buy and start investing.
• If it’s for long term investment, only consider fundamentally strong companies.
• It is the responsibility of every investor to do research and get confident that price will rise in the short or long term, before investing.

25. How do you make money from stocks?

• An investor can make money by booking profit at the time of selling of stocks.
• Investors can also earn money by getting dividends from the companies.
• Dividends are usually paid on a yearly or half-year or quarterly basis to the shareholders.

26. How can you select a good stock?

Below are the 8 things to consider in selecting the stocks.

1. Market Capitalization
2. Stock price
3. Possibility of revenue growth of companies.
4. Earnings Per Share of the stock.
5. Dividend yield.
6. Historical prices data at least for last 5 years
7. Positive technical analysis
8. The Sector

27. Where do I buy stocks?

• Investors can buy and trade it in the stock market through brokers’ trading account.
• First, need to open a Trading and Demat account with a stockbroker, and then using their platform investors can buy stocks

28. What are the different stock sectors?

There are basically 1o main sectors in the stock market based on domain

1. Information Technology.
2. Financial sector.
3. Consumer
4. Energy
5. Utilities.
6. Health Care.
7. Real Estate.
8. Materials.
9. Communication Services.
10. Consumer Staples.

29. Can I buy 1 share?

• There is no minimum order limit to buy shares from the stock market.
• An investor can buy 1 share of listed companies in stock

30. Can you get rich from stocks?

• An investor can get rich from the stock market if invested in growing companies.
• To get rich investors to need to wait for a long time frame like 10 to 15 years.

31. Can I buy a share today and sell tomorrow (BTST)?

• Some brokers provide the option of BTST, Buy Today, Sell Tomorrow.
• Traders can sell the shares before the actual delivery before credited in the Demat account.
• With BTST option, a trader can sell shares within T+2 days.

32. Should I buy red or green stocks?

• An investor can buy green or red stock.
• Green means the prices in the recent past have gone up (positive momentum), whilst Red means prices have gone down( negative momentum).
• It is advisable to buy stocks that have the chance of having positive momentum.

33. What is a good price for a stock?

• If P/B (price-to-book) ratio is less than 1 is considered as a good value for a stock to purchase.
• If the value is less than 1 is indicating undervalued stock.
• Some value investors consider P/B value under 3.0 is potential to buy.

34. How are the stock’s total holdings calculated?

• The number of shares of stock holding multiplied by the current market price is the method to calculate the total holdings.

35. What time of day is best to buy stocks?

• Regular trading begins at 9:00 m. and ends at 3:30 PM.
• The best trading time of the day is between 9:30 AM and 3:00 PM as the market will be comparatively stable after half an hour of market opening and half an hour before market closing.

36. What is a good amount of money to invest?

• It is ideal to decide on the base of percentage of Income.
• Between 10% and 15% of your annual income is the amount most financial planners advise.
• If possible to invest more percentage in value stocks will help to create wealth early.

37. Can I sell intraday share the next day?

• Intraday trade needs to square off before the market hour close.
• Some brokers allow converting Intraday position into delivery by paying the balance trading amount.
• It is advisable to close the trade position in a day itself.

38. Can I sell shares without buying?

• Traders can sell the stock without buying using the short sell option provided by the brokers.
• Using the short sell method, traders can make money in equities markets without owning shares, during downtrend.
• Using short sell, the trader is borrowing stock from a broker and sell the borrowed stock, and then buy it when the price drops.

39. Can I sell futures without buying?

• Yes, futures can sell without buying them.
• Trader cannot realize a profit or loss in futures trading until square off the position.
• Square off means placing an apposite position order for the same quantity later.

40. How can I buy a future?

• A futures contract is an agreement on an underline asset that traded on an exchange.
• In a future contract, one party agrees to buy a given quantity of securities on a future date and another selling party agrees to provide it.

41. How can I buy Nifty options?

• First need to add the NIFTY options to the watch list and select CE or PE, which need to buy.
• Select the strike price and buy CE or PE by paying the premium.

42. Why is the option better than the future?

• Option contract provides only the right to the buyer, not an obligation.
• In option, the maximum risk to the buyer is limited to the premium paid.

43. What is the future in the share market?

• Futures share market is a financial contract on an underlying asset.
• A futures contract is an agreement between the buyer and seller to sell or buy a specified quantity of underlying equity share upon a price agreed on a future date.

44. Can I buy Nifty 50?

• There is no option for an investor to buys Nifty 50 directly.
• Nifty 50 is an Index comprising of the top 50 stocks listed in the share market.
• We can buy 50 stocks in the Index so that we will get the same growth as Nifty 50 grows.

45. What is F&O trading?

• F&O stands for Futures and Options, it is a derivative of shares in the stock market.
• F&O derive their values from an underlying asset such as shares, currency, gold…

 46. What is F&O expiry?

• For every F&O contract, it will have an expiry date i.e. up to that date only the F&O contract is valid.
• Before an option expires, its owners need to square off the position to realize their profit or loss.

 47. Can I buy Bank Nifty?

• Bank Nifty can buy like any other option contract.
• Bank Nifty comprising 30 shares of different listed banks.
• A trader can buy a call or put option on the base of a bullish or bearish market.

48. Can I buy Nifty intraday?

• Yes, it is possible to buy or sell nifty options intraday.
• The process of Nifty intraday trade is similar to normal option trade.

49. Can we invest directly in Sensex?

• The Nifty consists of the top 50 listed companies of the share market and Sensex consist of 30 companies.
• An investor can invest in the companies that come in this list so that they will get the same growth of Sensex or Nifty.

50. What is PE & CE?

• PE & CE are the two terms of options trading PE-Put Option and CE- Call Option.
• CE stands for “call European” (Right to Buy) and PE stands for “Put European” (Right to Sell).
• When the market goes up, the premium will go up and when underlying security’s price goes down PE premium goes up.

CONCLUSION:

Share market is the place where people can buy and sell shares and make a profit. There are many ways traders can make money from the share market like intraday, BTST, short sell, position trading… More than a trading instrument, the share market is a perfect investment option for those who would like to have financial growth. Every investor needs to learn at least fundamental and technical analysis before investing in the stock market.

Thanks and Regards

Harry

The objectives of personal finance learning for newbie earners are to get them basic financial knowledge and necessary tools that help them to build the life which they envision. This personal financial learning for newbie earners blog will cover the basics about the following 4 topics which are essential for all new earners to understand before getting the first salary in hand.

1. 10 easy Investment options for newbie earners.
2. What is Personal financial literacy?
3. What are Personal financial responsibilities?
4. How to excellent Personal financial literacy?

10 easy investment options for newbie earners.

Saving and investing our hard-earned money in the right options is one of the important financial decisions of newbie earners. Personal financial learning helps newbie earners to take suitable decisions in selecting investment options among low-risk, medium-risk, and high-risk investments.

In general, bank FD, RD, ULIP, PPF  NPS… are considered low-risk savings and investment options. Equity and market-linked investments like MF and direct equity investments are considered high-risk investments. A combination of market-linked investments and fixed return investments are considered as medium-risk investments.

10 easy investment options for newbie earners.

1. Bank FD-Fixed Deposit & RD- Recurring Deposit.

• In RD-Recurring deposit, investment is made at a fixed period regularly for the predefined time period.
• FD- Fixed deposit is the investment in which investment is done for one-time for a specific period of time.
• For both, the percentage interest rate for the invested amount will remain the same.

2. ULIP – Unit-linked Insurance Plan.

• Unit Linked Insurance Plans (ULIPs) is moderate risk, a goal-based financial instrument that offers benefits of protection and Investment for the long term.
• Unit linked Insurance Plan is linked directly to the equity market.
• It offers flexibility to invest units in debt funds or in equity depending upon our risk appetite.
• ULIPs provide long term capital gains and also offer a protection cover.

3. PPF- Public provident fund.

• The public provident fund scheme is a safe and low-risk financial instrument.
• PPF is mandated by the government and provides a fixed return.
• The minimum time period is for 15 years and it can be continued.
• The investment minimum amount is 500 rupees and a maximum of 1.5 Lakh annually.
• PPF provides the option to avail loan against the amount in the account.

4. MF- Mutual Funds.

• A mutual fund is a market-linked financial instrument that pools money from a group of investors and put it into a portfolio of financial instruments.
• The portfolio includes stocks, bonds, and government securities…
• Buying and selling shares in a mutual fund are doing as units of portfolio.
• The risk of Mutual fund investment, Is based on the financial instrument on with the units are invested.

5. NPS- National Pension Scheme.

• NPS is a government-sponsored pension scheme.
• During retirement, NPS allows investors to withdraw a part of the corpus and use the remaining corpus to buy an annuity of security.
• NPS helps investors to get a regular income after retirement.

6. Investment in Direct Equity.

• Direct equity investment is a high-risk investment that will ensure long term growth.
• Growth of our investment fund based on the way the price of a share of the company performs.
• Investors are eligible for getting the dividend as and when companies offer it to the shareholders.

7. Bonds come under RBI Regulations.

• Bonds are fixed-income instruments, hence it is a low-risk instrument.
• Bonds issued by government bodies or companies to raise capital from investors.
• During maturity, investors will get back the investment amount with interest.
• Bonds are available as Fixed-Rate Bonds and Floating-Rate Bonds

8. Gold / Gold ETF

• Gold-ETF (Exchange Traded Fund), is a commodity-based Mutual Fund investment.
• In Gold- ETF amount is invested in assets like gold.
• Gold ETF  investors will get the unit’s equivalent in cash instead of actual gold.

9. Post Office Saving Scheme.

• Most of the post office fixed deposit investment is for a period of 10 years.
• It is a low-risk investment and provides a higher return than normal bank FD.
• The annual interest of the deposit is credited to the investor’s savings account.

10. IPO – Initial Public Offerings.

• Through IPO shares of a private company are offered to the public.
• Once the IPO is realized, investors can apply through the Demat account and get it.
• IPOs help companies to obtain capital through the primary market.

Well thought out decision based on personal financial literacy is needed to select the suitable investment options, which help newbie earners to meet the Personal financial responsibilities.

What Is Personal Financial Literacy?

Personal Financial literacy is the capability to understand the financial principles, which help to manage money effectively and wisely. The essential part of personal financial literacy is knowing how to manage money. To become personal financial literate, newbie earners need to take a step to implement personal financial principles in life.

• Financial Literacy is important for newbie earners because a proper understanding of personal finance concepts helps them to manage the earning effectively.
• Money is easy to mismanage, it will lead to a financial struggle in the future.
• If newbie earners spend time to learn how to manage money and apply those skills in life, they can build wealth easily.

What Are The Benefits of Personal Financial Literacy?

The benefits of personal financial literacy are countless however here are a few important points to the lookout.

• Net worth will grow continually, irrespective of what you earn.
• Helps to avoid going into debt, even with lower earnings.
• Less Financial Struggle in the older ages, even if don’t have any income.
• Better Household Finances, even in the situation of increasing expense.

What are personal financial responsibilities?

Financial responsibility means having a lifestyle that meets the social standards within means, regardless of the level of income. To succeed in personal finances, newbie earners needs to have a close look at the financial situations, evaluate earning, and make adjustments in the spending habits to match it. As Financial responsibility had a big impact on the future, it is important to expertise on personal financial literacy from an early stage of earnings.

Key points of Personal Financial Responsibilities. 

• The management of personal finances effectively to meet the financial needs of individuals and family.
• Meeting the standard of lifestyle irrespective of economic, cultural, social, and technologies.
• Able to support yourself and family financially for at least six months irrespective of zero income and adverse circumstance.
• Having an organized plan for saving and spending money.
• Making the right decisions early in life to become financially independent and having a comfortable retirement life.
• Understanding the four basic components of finance, like income, Expenses, Assets, and Dept.
• Having a good understanding of the difference between a Good and Bad Debt

To get expertise in the subject of personal finance, one need to understand personal financial planning concepts and applications. Application of Personal finance includes cash in and outflow, net worth and asset, income taxes, insurance, and consumer debt… A Financially Responsible person avoids Debt and should meet the financial emergencies from the savings or investments.

How to excel in personal financial literacy?

People will spend years getting a degree to get a well-paid career. To manage the earnings from the career newbie earners need proper financial literacy. It doesn’t take years to get financial literacy for beginners. With a focused effort, anyone can become financially literate over the course of a few weeks.

To develop personal finance literacy, newbie financial learners have many options like,

• Take a paid or free courses online or offline from some experts,
• By reading a couple of personal finance for beginners books.
• Learning from YouTube, Blogs, or Articles from any search engine.

5 practical steps to excel in personal financial literacy.

In-spite of learning to become experts in the domain of financial literacy needs to practice the following 5 steps.

1. Track Your Income and Net Worth.

• The difference between assets and debt tells where newbie earners stand financially.
• Keep an eye on income and expense help to keep the track of the progress of financial literacy.
• Manage Money by Creating a personal investment portfolio help to increase the net worth, irrespective of earning.
• Newbie Earners need to focus on regulating expenses wisely to become Personal financial responsible in society.

2. Set a Budget, time Period.

• As part of Personal Financial Learning, all newbie Earners should prepare a checklist of expenses.
• The checklist helps to knockout unwanted expenses and meet the personal budget with within the income.
• This budgeting is the starting point of for financial goals in life.
• Proper budgeting help to spend judiciously and deal with surplus cash.

3. Take a Daily Money Minute

• It is important to spend at least one minute every day to check financial transactions.
• Now there are many online apps available to manage and monitor our daily expenses.
• Preparation of money minutes helps to identify overall expenses and keep track of financial goal progress.
• This also helps to set the spending tone for the rest of the days in the month.
• In money minutes it is important to add a personal balance sheet and tax paid.

4. Allocate at Least 20% for the future.

• Planning for Retirement should be one of the prime objectives of Personal financial responsibilities.
• Newbie earners need to priorities, their savings, and investments.
• First priority of fund allocation should for building up emergency savings and retirement funds.
• Managing the debt wisely will help to safeguard the money for the future.

5. Spend at least 10% of Your Income on Lifestyle and fun.

• Spending the money for lifestyle and fun is an important part of Personal financial learning for Newbie Earners.
• If we don’t spend the money for the fun, during our retirement age, we may have a corpus of the amount in our hand, however, it may lead to regret about not enjoying life at a younger age.
• Income for Lifestyle and fun should include movies, outing, travel… ideally anything that doesn’t cover under the basic life

Conclusion:

For newbie earners, it is essential to spend time developing Personal financial literacy. through that, they can meet Personal financial responsibilities. Making proper budgeting and tracking the expenses is the fundamental of Personal financial literacy. The goal of every newbie earner should be to have a hassle-free retirement life with financial freedom, as early as possible. Practicing the knowledge earned through financial literacy is an important factor to enhance the skills.

Thanks & Regards.

Harry.