How to Buy Stocks (Demat & Trading)

So you want to buy a share of Reliance or Tata Motors? You can't just walk into their office and ask for it. You need a gateway. That gateway is the Demat & Trading Account.

The Two Accounts You Need

Though they are usually opened together, they have different functions:

1. Demat Account (Dematerialized)

   • Function: Storage.
   • Analogy: Like a Bank Locker or Wallet. It holds your shares in digital format.
   • Managed by: Depositories (NSDL or CDSL).

2. Trading Account

   • Function: Transaction.
   • Analogy: Like a Cheque Book or UPI App. It allows you to buy and sell.
   • Managed by: Stock Broker (Zerodha, Groww, ICICI Direct).

The Flow: Bank Account (Money) → Trading Account (Buy Order) → Exchange (Match) → Demat Account (Shares Stored).

Choosing a Stock Broker

Brokers come in two flavors:

1. Discount Brokers (Recommended for Beginners)

• Examples: Zerodha, Groww, Upstox, Angel One.
• Fees: Very low (often ₹0 for delivery trades, ₹20 for intraday).
• Services: Pure execution platform. No tips, no advisory.
• Best For: Do-it-yourself investors.

2. Full-Service Brokers

• Examples: ICICI Direct, HDFC Securities, Kotak Securities, Motilal Oswal.
• Fees: High (percentage based, e.g., 0.5% of trade value).
• Services: Research reports, relationship manager, call & trade.
• Best For: People who need hand-holding and don't mind paying extra.

Verdict: Go with a Discount Broker. Why pay 0.5% commission when you can pay ₹0?

Step-by-Step: Opening an Account

It's 100% online and takes 15 minutes.

Documents Needed:

• PAN Card (Mandatory)
• Aadhaar Card (Linked to Mobile number for OTP)
• Bank Proof (Cancelled Cheque or Statement)
• Signature (Photo of sign on white paper)
• Income Proof (Only for F&O trading - Salary slip/ITR. Not needed for stocks).

Process:

1. Download App (e.g., Zerodha Kite / Groww).
2. Enter Mobile & Email.
3. Enter PAN & DOB.
4. Pay Account Opening Fee (₹0 to ₹200).
5. Complete e-KYC (Aadhaar OTP).
6. In-Person Verification (IPV): Record a 10-sec video of yourself.
7. e-Sign documents.

Timeline: Account activates in 24-48 hours.

How to Place Your First Buy Order

Once active, here is how you buy:

1. Add Funds: Transfer money from Bank to Trading Account via UPI/Netbanking.
2. Search Stock: Type "TCS" or "INFY" in search bar.
3. Click Buy: You will see an order window.
4. Select Options:
   • Product: CNC (Cash N Carry) / Delivery. (Means you want to hold it). Avoid MIS (Intraday).
   • Qty: Number of shares (e.g., 1).
   • Order Type:
     • Market: Buy at current price immediately.
     • Limit: Buy only at a specific price (e.g., Current is ₹3500, you bid ₹3490).
5. Swipe to Buy: Order placed!

Settlement:

• T+1 Day: Shares will appear in your Demat account the next working day.

Important Charges (Read the Fine Print)

1. Brokerage: Fee per trade (₹0 or ₹20).
2. STT (Securities Transaction Tax): 0.1% on delivery trades. Govt tax.
3. DP Charges: ~₹13-15 per company per day when you SELL. (Charged by CDSL/NSDL, not broker).
4. AMC (Annual Maintenance Charge): ₹300-500 per year (Some brokers are free).

Common Mistakes Beginners Make

❌ Mistake 1: Buying "Intraday" (MIS) by mistake

You buy a stock, and it automatically gets sold at 3:20 PM at a loss! Fix: Always select CNC / Delivery / Long Term.

❌ Mistake 2: Ignoring DP Charges

Selling 1 share of 10 different companies? You pay DP charge 10 times! Fix: Sell in bulk if possible.

❌ Mistake 3: Losing Password/PIN

Recovering account access can be tedious. Use a password manager.

❌ Mistake 4: Trading in F&O

Brokers will push you to activate "Futures & Options." DON'T DO IT until you are an expert. 90% of F&O traders lose money.

7-Day Action Plan

Day 1: Gather documents (PAN, Aadhaar, Bank Statement).
Day 2: Compare brokers (Zerodha vs Groww vs Angel). Choose one.
Day 3: Complete the account opening process online.
Day 4: Wait for activation. Read the "Charges" page of your broker.
Day 5: Add a small amount (₹500) to your trading account.
Day 6: Search for a Nifty 50 stock (e.g., ITC or Tata Steel).
Day 7: Place your first "Market" order for 1 share. Congratulations, you are a shareholder!

Quiz

💡 Final Wisdom: Opening a demat account is the first step to financial freedom. But remember, having a Ferrari (Demat Account) doesn't make you a racer. Learning how to drive (Investing Knowledge) does.