5 Steps to Start Investing in Sensex
The benchmark index of BSE, Sensex, offers investors a host of investment opportunities. With the Indian as well as global stock market taking a major hit for the last few months, it can be an excellent time for new investors to start investing. Check out this post for detailed steps on how to start investing in the benchmark BSE index.
Launched in 2001, the Sensex index is known as the pulse of the Indian stock market. It is the benchmark index of the Bombay Stock Exchange or BSE and is made up of 30 component companies from different industrial sectors of the Indian economy. In other words, think of it as a portfolio of 30 of the most actively traded companies from all the different industrial sectors.
With the Indian as well as global stock market consistently falling over the past few months, this can be a great time to begin for someone planning to invest in the BSE index. But how do you start investing in the stock market? Here are the steps that you need to follow-
- Try to Understand the Basics of BSE and Its Indexes
The first and most crucial step to start investing in the stock market is to understand at least the basics of how the market works. Try to know how an index is calculated, how the price of stocks moves, working hours of the market, etc. before doing anything else.
Without knowledge and experience, it is almost impossible to make profits in the stock market consistently.
- Look for a Broker
Once you’ve spent a few weeks on understanding the basics of the stock market, the next step is to find yourself a broker. Search on the internet, and you’ll find several great options. You’ll need a demat and trading account to start trading, and it is the broker who can set up the same for you.
Go for a licensed and reputed broker and check their document requirements before proceeding. Most of the brokers would ask you to submit your ID proof, address proof, etc. Also, many of the brokers prefer in-person verification. So, you might be required to visit the nearest branch office of the broker for verification.
- Understand their Trading Platform
Once you’ve got yourself a demat and trading account, you can now start investing in the stock market. Most brokers now have an online trading platform. When you open a demat account, you’ll be provided with a username and password for logging into the trading platform.
Use the credentials to log in and try to get a feel of the platform. Check the different options, how the buying and selling of trades are placed, where you can check the trade history, charts, funds, etc.
- Know Where You Want to Invest
You can either invest in the BSE index or the stocks that are listed on the index. If you want to trade the index, you can do so by investing in ETFs that invest in the index. The other option is to invest in the stocks listed on the index.
If you go with the stocks, you can do spot trading or invest in the derivative contracts of those stocks. Understand the differences and how they work to make informed trading decisions.
- Start Investing
Now that you understand the basics of the market and have got yourself a demat account, you are now ready to invest in Sensex. If you want to invest in the companies listed on the index, select the companies very carefully and know when you’d close the trade.
Once your target is achieved, rather than holding the position and expecting higher profits, make sure that you close the position. Avoid placing trades if you do not have an entry as well as an exit price. Make use of stop-loss if you cannot regularly monitor the market.
The stock market can appear very confusing and even risky in the initial days. By regularly spending time on educating yourself, you’ll understand the intricacies of the market and become a more confident investor. If you think you are ready to invest, follow the steps discussed above to begin.