Stock market investments offer better returns

Most people refrain from investing in stock markets as they are not chartered accountants or they do not have an academic financial background.

Some say it's a gamble while some fear the loss of money. They end up losing money for they do not have an armour of knowledge.

One needs to identify good companies, reduce the element of risk and invest for a long period. A fixed deposit gives a mere 5 to 6 per cent return. If the same amount is invested in a stock, it can give a whooping return of 14 to 20 per cent.

NSE and BSE are the two exchanges in stock market. We invest in stocks through a registered intermediary agent called the stockbroker. Securities and Exchange Board of India (Sebi) is a regulatory body assuring the investors with a legal framework setup.

One needs to have a trading account and demat account as a prerequisite for investing. Trading account is the platform through which you buy or sell shares.

Demat account holds your shares in an electronic format, it's a kind of digital wallet. Trading account is for money and demat account is for shares.

A stockbroker helps us in setting up a trading and demat account. They provide us with a trading terminal on a website or an app. They give us tips on investment.

For all this, they charge a fee called brokerage. All stockbrokers work as per SEBI guidelines. Select a stockbroker on the basis of its popularity, number of users, brokerage fees and the kind of tools they provide.

As most of the stock market investors know, Zerodha is very popular because its brokerage is low, provides active service and has a greater number of users too.

Any company which wants to raise capital offers few of its shares to the stock exchange. Once listed in the share market, its shares are bought and sold with the intention of making profit. Few shares are open to public as IPO.

The most recent one being IRCTC. Prices of shares go up and down based on different views, news, related to company or events like election or results.

Your profits depend on your skill, risk appetite and whether you are an investor or trader. Warren Buffet is an investor. Longer the time period of investment the huge is your return.

Long term perspective of investment in good companies irrespective of market fluctuations generates wealth.

The performance of stocks is reflected in the index. Sensex and Nifty are two indexes. Sensex has 30 major companies from the stock exchange and Nifty has 50 major companies from the NSE.

Index acts a barometer for comparing any trading or investing activity.

(The author is a homemaker who dabbles in stock market investments in free time)