Visiting this old post after a long time. There ahave been too many IPOs in the indian stock markets which has brought people back to investing recently. I have been bumping into many enquiries about how does one start investing. So here you go.
As I said, too many bulls have been locking horns in the stock market recently. A fallout of this capital market bull rally is the exponential increase in the activities in the primary market (IPO market). Companies are rushing in to tap the capital markets and raise funds through Initial Public Offers (IPO) and Follow on public offers (FPO). We have already discussed why one wishes to raise money from public. Now lets see how we, as a public can put our money. Though paper work has been considerably reduced, the process of applying in an IPO is still little complicated for people not familiar with investing in the stock market. Here are simple steps to start investing in stock market and IPO's. There are two basic ways to invest in IPO's
- Online mode
- Offline mode
1.
Investing in IPO's online (through the internet)
This is the simpler of the two methods. To get started in investing in IPO's you will need to open a demat (Dematerialization) account cum trading account (To do this you will need a bank account and a PAN number). As you open the account, you will be given a user id and password to login through your trading account. There are various options and any bank will offer you an online/offline training on how to operate your demat account. You got to login and select the IPO you wish to invest in. Before you select to buy, transfer funds from your bank account to your trading account. Select the number of shares you want to apply for and the price at which you want to bid for (or use cut off option). If you get the shares allotment, the shares will be credited to your demat account. If you dont, the IPO refund will be sent by cheque to your postal address or through ECS to your bank account.
2.
Investing in IPO's offline
Here you will need only the demat account. Trading account is not necessary unless you decide to sell the shares you have been allotted through IPO's. You will have to visit your nearest broker and get the IPO application form, fill it up and give the filled form along with the cheque to the broker. You will be given an acknowledgement form. If you apply for more than Rs. 50,000 you will need to attach a photocopy of your PAN card with the IPO application form.
Online or offline : Which method should you choose?
It depends. Online mode is more convenient and saves time, effort & maybe money too (if you consider fuel cost). But you won't be able to give a stop payment if you decide to change your mind after applying. If you are doubtful about investing in an IPO, its always better to use the offline mode to invest.
Notes: - Its preferable to open a demat account in the same bank where you have your banking account. It will be easier to link them. But make sure your banker gives you online banking access and trading facility.
- Before investing in the stock market one should understand the risks involved or else the entire capital invested can be wiped out in no time.
- Do make sure to know every thing about the company who is floating and IPO before you decide to put your money in. Its better to have a professional advise.