Steps to Invest in the Indian Stock Market

Historically stock market investments have rewarded investors with significant riches over long periods of time. However, as you have rightly put in your question, one has to approach the subject in a systematic manner. Here are the steps that I had followed:

Step 1:

First and foremost is learn investing. Without sound investing knowledge people may face unnecessary pitfalls and may get disheartened early in their investing careers. Please read the book “Intelligent Investor - The Investors' Bible” by Benajamin Graham. Please learn value investing for FREE at my blog, Value Investing.

Step 2

Using a stock filter, “Kotak Securities” which appear as follows:

Using two parameters ‘market cap’ between ‘1000 to 99999 crores’ and ‘PE Ratio’ between 1 and 10, filter the stock. It should yield you about 100 stocks for further study. You must study carefully past 10 years’ profitability ratios, solvency ratios, liquidity ratios, dividend track record, etc. Please note this is an indicative list.

The “Value Investing: Portfolio 2K15” is the final Indian Shares I have deemed fit for investing. The list is only for educational purposes. One cannot blindly invest the scrips mentioned there.

Step 3

Open a ‘Trading’ account with a stock broker and a ‘Demat’ account with a depositary. You should link an existing bank account or open a fresh bank account for automatic crediting of dividends. You stock broker will assist you in this. I use ‘Kotak Securities’ as my stock broker. ‘Zerodha’ offers minimal charges.

If you think learning stock investing very tedious, you may invest in ‘Exchange Traded Funds (ETFs), which are a type of mutual fund which mirrors popular indices like NIFTY 50, for which you have to undergo the procedure in Step 3, but instead of buying the share of a company you choose the ETF. Goldman Sachs NIFTY BEES and Goldman Sachs Junior NIFTY BEES are what I have invested in and shown in ‘Portfolio 2K15’. The advantage of ETFs is that fund management charges are very low at about less than 0.50% per annum.

Alternatively, you may choose normal mutual funds. I find the fund management charges are high.