Summer Training Project Report

On

“FINANCIAL INSTRUMENTS FOR INVESTMENT”

Submitted to

I.K. GUJRAL PUNJAB TECHNICAL UNIVERSITY

KAPURTHALA

In partial fulfillment of the requirement for the award of degree of

Master of Business Administration (MBA)

Submitted by Supervisor

Sagar Mr. Sukhjeet Singh Bajaj

2118730 Ms. Neha Singh

DEPARTMENT OF MANAGEMENT

CHANDIGARH BUSINESS SCHOOL OF ADMINISTRATION

MOHALI

2021-23
1
CERTIFICATE

2
3
 STUDENT DECLARATION

I, “Ashish Kumar”, hereby declare that I have undergone my summer training at

“Agile capital services” from 20/07/2022 to 23/08/2022. I have completed a research
project tilted “FINANCIAL INSTRUMENTS FOR INVESTMENT” under the
guidance of Mr. Sukhjeet Singh Bajaj.

Further I hereby confirm that the work presented herein is genuine and original and has
not been published elsewhere.

Sagar.

(Student name and Signature)

4
 FACULTY DECLARATION
I hereby declare that the student Mr. Sagar of MBA (II) has undergone his
summer training under my periodic guidance on the Project
titled “ FINANCIAL INSTRUMENTS FOR INVESTMENT”.

Further I hereby declare that the student was periodically in touch with me during
his/her training period and the work done by student is genuine & original.

(Signature of Supervisor)

5
 ACKNOWLEDGEMENT

“The satisfaction that accompanies on the successful completion of any work would be
incomplete unless we mention the name of the person, who made it possible, whose
constant guidance and encouragement served as a beckon of light and crowned our
efforts with success.” I consider it a privilege to express a few words of my gratitude
and respect to those who guided and inspired me in the completion of this project.

I would like to thank the management of Chandigarh Business School of

Administration, Landran with all depth of my heart of permitting me to undertake
Summer Training Project Report on such a relevant and significant topic as well as
providing me experts for guidance at various stages of the project.

I owe the deep sense of gratitude towards Dr. DEEPIKA.who has been instrumental
in providing me the right environment so that I proceed through the right direction of
the completion of the Summer Training Project Report.

I am deeply indebted to thanks Mr. Sukhjeet Singh Bajaj. for giving me the
opportunity to undergo my Summer Training Project Report under him and providing
me to work on such creative topic and providing his timely valuable suggestions and
guidance.

I also acknowledge with a deep sense of reverence, gratitude towards my parents, my

friends and all those who supported me in completing my project report, they always
supported me morally as well as economically for successfully completion of my
Summer Training Project Report.

Sagar

6
7
 TABLE OF CONTENTS

Certificate by Guide
ii

Student Declaration iii

Faculty Declaration iv

Acknowledgment
v

CHAPTER CHAPTER TITLE PAGE NO.

NO.
1 FINANCIAL INSTRUMENTS

1.1 Introduction
1.2 Features of Investment
1.3 Type of investment
1.4 How to research investment.

2
OBJECTIVES OF INVESTMENT.
3 PROCESS OF INVESTMENT.

4 DEMAT ACCOUNT.

4.1 Introduction.

4.2 importance of Demat Account

4.3 Benefits of Demat Account

4.4 Types of Demat Account.

8
 LIST OF TABLES

TABLE TABLE TITLE PAGE

NO. NO.

LIST OF FIGURES

FIGURE FIGURE TITLE PAGE

NO. NO.

9
 Chapter – 1

FINANCIAL INSTRUMENTS FOR INVESTMENT

1.1) ITRODUCTION :-

The four main classes of financial instrument that investors make use of to achieve either income or
capital growth are equities, also known as stocks or shares; debt instruments, also known as bonds or
bills; cash; and derivatives. Equities and debt instruments are collectively known as securities.

The investment industry exists to serve its customers. There are two main groups of customers – investors and

security issuers. Investors may be private individuals, charities, companies, banks, collective investment schemes

such as pension funds and insurance funds, central and local governments or “supranational institutions” such as the

World Bank.

Investors in turn have investment objectives, which may be to increase wealth (capital growth) or to provide income.

Some investors will have only one of these objectives, some will have both. For example, a high earning private

individual probably has all the income that he or she needs from employment, and wishes to invest surplus cash to

provide capital growth. A charity, however, may need the maximum possible income that it can get from its

investments in order to fund its activities.

10
1.2 ) FEATURES OF INVESTMENT

1. Expectation Of Return

Return expectation is the main objective of investment. Investors expect regularity of high and consistent income for their capital.

2. Safety

Investors expect safety for their capital. They desire certainty of return and protection of their investment or principal amount.

3. Liquidity

Liquidity means easily sale or convert the capital or investment into cash without any loss. So, most investors prefer liquid
investments. 

4. Marketability

It is another feature of investment that they are marketable. It means buying and selling or transferability of securities in the
market. 

11
5. Stability Of Income

Investors invest their capital with high expectation of income. So, return on their investment should be adequate and stable.

TYPES OF INVESTMENT
INSTRUMENTS:-

10 COMMON TYPES OF INVESTMENT

INSTRUMENTS :--

12
Investing can intimidate a lot of people because there are many options, and it can be hard to figure out which
investments are right for your portfolio. This guide walks you through 10 of the most common types of investments,
from stocks to crypto, and explains why you may want to consider including each in your portfolio. If you’re serious
about investing, it might make sense to find a financial advisor to guide you and help you figure out which
investments can help you to meet your financial goals.

1. Stocks

Stocks, also known as shares or equities, might be the most well-known and simple type of investment. When you
buy stock, you’re buying an ownership stake in a publicly-traded company. Many of the biggest companies in the
country — think General Motors, Apple and Facebook — are publicly traded, meaning you can buy stock in them.

How you can make money: When you buy a stock, you’re hoping that the price will go up so you can then sell it for a
profit. The risk, of course, is that the price of the stock could go down, in which case you’d lose money.

13
 2. Bond’s

When you buy a bond, you’re essentially lending money to an entity. Generally, this is a business or a government
entity. Companies issue corporate bonds, whereas local governments issue municipal bonds. The U.S. Treasury
issues Treasury bonds, notes and bills, all of which are debt instruments that investors buy.

How you can make money: While the money is being lent, the lender gets interest payments. After the bond matures
— that is, you’ve held it for the contractually determined amount of time — you get your principal back.

The rate of return for bonds is typically much lower than it is for stocks, but bonds also tend to be a lower risk. There
is still some risk involved, of course. The company you buy a bond from could fold, or the government could default.
Treasury bonds, notes and bills, however, are considered very safe investments.

3. Mutual Funds
A mutual fund is a pool of many investors’ money that is invested broadly in a number of companies. Mutual funds
can be actively managed or passively managed. An actively managed fund has a fund manager who picks securities
in which to put investors’ money. Fund managers often try to beat a designated market index by choosing
investments that will outperform such an index. A passively managed fund, also known as an index fund, simply
tracks a major stock market index like the Dow Jones Industrial Average or the S&P 500. Mutual funds can invest in a
broad array of securities: equities, bonds, commodities, currencies and derivatives.

Mutual funds carry many of the same risks as stocks and bonds, depending on what they are invested in. The risk is
often lesser, though, because the investments are inherently diversified.

How you can make money: Investors make money off mutual funds when the value of stocks, bonds and other
bundled securities that the fund invests in go up. You can buy them directly through the managing firm and discount
brokerages. But note there is typically a minimum investment and you’ll pay an annual fee.

4. Exchange-Traded Funds (ETFs)

14
Exchange-traded funds (ETFs) are similar to mutual funds in that they are a collection of investments that tracks a
market index. Unlike mutual funds, which are purchased through a fund company, shares of ETFs are bought and
sold on the stock markets. Their price fluctuates throughout the trading day, whereas mutual funds’ value is
simply the net asset value of your investments, which is calculated at the end of each trading session.

How you can make money: ETFs are often recommended to new investors because they’re more diversified than
individual stocks. You can further minimize risk by choosing an ETF that tracks a broad index. And just like mutual
funds, you can make money from an ETF by selling it as it gains value.

5. Certificates of Deposit (CDs)

A certificate of deposit (CD) is a very low-risk investment. You give a bank a certain amount of money for a
predetermined amount of time. When that time period is over, you get your principal back, plus a predetermined
amount of interest. The longer the loan period, the higher your interest rate.

How you can make money: CDs are good long-term investments for saving money. There are no major risks because
they are FDIC-insured up to $250,000, which would cover your money even if your bank were to collapse. That said,
you have to make sure you won’t need the money during the term of the CD, as there are major penalties for early
withdrawals.

6. Retirement Plans

15
There are a number of types of retirement plans. Workplace retirement plans, sponsored by your employer,
include 401(k) plans and 403(b) plans. If you don’t have access to a retirement plan, you could get an individual
retirement plan (IRA), of either the traditional or Roth variety.

How you can make money: Retirement plans aren’t a separate category of investment, per se, but a vehicle to buy
stocks, bonds, and funds in two tax-advantaged ways. The first, lets you invest pretax dollars (as with a traditional
IRA). The second, allows you to withdraw money without paying taxes on that money. The risks for the investments
are the same as if you were buying the investments outside of a retirement plan.

7. Options

An option is a somewhat more complex way to buy a stock. When you buy an option, you’re purchasing the ability to
buy or sell an asset at a certain price at a given time. There are two types of options: call options, for buying assets,
and put options, for selling options.

How you can make money: As an investor, you lock in the price of a stock with the hope that it will go up in value.
However, the risk of an option is that the stock could also lose money. So if the stock decreases from its initial price,
you lose the money of the contract. Options are an advanced investing technique, and retail should exercise caution
before using them.

16
 8. Annuities
Many people use annuities as part of their retirement savings plan. When you buy an annuity, you purchase an
insurance policy and, in return, you get periodic payments.

Annuities come in numerous varieties. They may last until death or only for a predetermined period of time. The may
require periodic premium payments or just one up-front payment. They may link partially to the stock market or they
may simply be an insurance policy with no direct link to the markets. Payments may be immediate or deferred to a
specified date. They may be fixed or variable.

How you can make money: Annuities can guarantee an additional stream of income for retirement. But while they are
fairly low risk, they aren’t high-growth. So investors tend to make them a good supplement for their retirement
savings, rather than an integral source of funding.

9. Cryptocurrencies

17
Cryptocurrencies are a fairly new investment option. Bitcoin is the most famous cryptocurrency, but there are
countless others, such as Bitcoin and Ethereum. These are digital currencies that don’t have any government
backing. You can buy and sell them on cryptocurrency exchanges. Some retailers will even let you make purchases
with them.

How you can make money: Cryptos often have wild fluctuations, making them a very risky investment. However,
some investors use them as alternative investments to diversify their portfolios beyond stocks and bonds. You can
get them at cryptocurrency exchanges.

10. Commodities

Commodities are physical products that you can invest in. They are common in futures markets where producers and
commercial buyers – in other words, professionals – seek to hedge their financial stake in the commodities.

Retail investors should make sure they thoroughly understand futures before investing in them. Partly, that’s because
commodities investing runs the risk that the price of a commodity will move sharply and abruptly in either direction
due to sudden events. For instance, political actions can greatly change the value of something like oil, while weather
can impact the value of agricultural products.

Here’s a breakdown of the four main types of commodities:

1. Metals: precious metals (gold and silver) and industrial metals (copper)

2. Agricultural: Wheat, corn and soybeans
3. Livestock: Pork bellies and feeder cattle
4. Energy: Crude oil, petroleum products and natural gas

How you can make money: Investors sometimes buy commodities as a hedge for their portfolios during inflation. You
can buy commodities indirectly through stocks and mutual funds, or ETFs and futures contracts.

How to Buy Different Types of Investments

There are two main ways for you to purchase the different types of investments you may be interested in buying.
Each is easy to do, but only one of the two provides a service that is completely done for you. The two ways to buy
the types of investments you want are:

18
  Start an online brokerage account: You can elect to manage your own investments and just open a
brokerage account. This enables you to get up and running quickly with the ability to buy stock, bonds,
mutual funds, and more in a matter of minutes. The only downside is that you’ll be making the final financial
decisions all on your own.
 Hire a financial advisor: The other way to buy multiple types of investments is to hire a financial advisor. The
advisor can not only provide you with access to buy and trade assets but they can also help you figure out
an overall financial strategy and prepare you adequately for retirement. This is more of an automated
process that you just have to approve trades or investments, and the advisor takes care of the details.

Bottom Line

There are a lot of different types of investment to choose from. Some are perfect for beginners, while others require
more experience and research. Each type of investment offers a different level of risk and reward, giving you a good
option or two no matter what your goal might be. Investors should consider each type of investment before
determining an asset allocation that aligns with their overall financial goals.

Investing Tips
1 It can sometimes help to have an expert in your corner when investing. Finding a qualified financial
advisor doesn’t have to be hard.  Smart assets tools  matches you with up to three financial advisors who serve
your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re
ready to find an advisor who can help you achieve your financial goals, get started now.
2 If your investments pay off, you may owe the capital gains tax. Figure out how much you’ll pay when you sell
your stocks with our capital gains tax calculator.

Cash Instruments it's

In this type of financial instrument, the value is directly influenced by the market condition. There are two types of

cash instruments – securities and deposits & loans.

5. Securities: These financial instruments are traded on the stock market, wherein security purchases signify ownership of
a slice of the publicly-traded company.

6. Deposits & loans: These financial instruments are monetary assets representing some sort of contractual agreement
between the parties involved.

19
Derivative Instruments
In this type of financial instrument, the value is ascertained from the underlying assets, such as stocks, currency,

bonds, etc. Some of the most common examples of derivatives instruments are discussed below.

 Forward: It is a contractual obligation between two parties in a derivative transaction in which

the exchange of the underlying takes place at the end of the contract at a particular price.

 Future: It is a derivative transaction that facilitates the exchange of the underlying on a pre-

decided future date at a pre-determined exchange rate.

 Option: It is an agreement in which the buyer of the option enjoys the right to exercise the

option of either purchasing or selling the underlying at a pre-determined price within a particular

period of time.

. Foreign Exchange Instruments

This type of financial instrument is associated with the foreign market and primarily deals in

currency agreements, which can be further broken down into three categories.

3 Spot: It is called spot because the exchange of currency takes place no later than the 2 nd working day

from the date of the agreement.

4 Outright forward: The exchange of currency takes place before the actual date as per the

agreement.

5 A currency swap involves simultaneous purchasing and selling currencies with different value

dates.

20
21
 1.4 ) How to Record Financial Instruments?

Other than the classification mentioned above, the financial instruments can also be classified

into two asset classes – equity instrument and debt instrument. Now, let us look at how

these two categories of asset classes are recorded in the financial statements.

Equity Instrument: It is measured at its fair value minus any issue costs. In many cases, the equity
shares are recorded at their face value, while the excess considerations are recorded in the form of share

premium, and the issue costs are deducted from the share premium.

Debt Instrument: It is recorded at the cost of acquisition, while any discount or premium over the par

value is amortized over the life of the asset. The transaction costs are capitalized.

CHAPTER – 2

# SOLE MOTIVE OF INVESTMENT :--

22
 1) Safety
It is said that there is no such thing as a completely safe and secure investment. But you can get pretty close.

Investing in government-issued securities in stable economic systems is one. U.S.-issued bonds remain the gold
standard. You have to envision the collapse of the U.S. government to worry about losing your investment in them.

Next in safety are AAA-rated corporate bonds issued by large, stable companies. Such securities are arguably the
best means of preserving your principal while receiving a pre-set rate of interest.

The risks are similar to those of government bonds. You'd have to imagine IBM or Costco going bankrupt in order to
worry about losing money investing in their bonds.

Extremely safe investments also are found in the money market. In order of increasing risk, these securities
include Treasury bills (T-bills), certificates of deposit (CDs), commercial paper, or bankers' acceptance slips.

Safety comes at a price. The returns are very modest compared to the potential returns of riskier investments. This
is called "opportunity risk." Those who choose the safest investments may be giving up big gains.

There also is, to some extent, interest rate risk. That is, you could tie your money up in a bond that pays a 1%
return, and then watch as inflation rises to 2%. You have just lost money in terms of real spending power.

That is why the very safest investments are short-term instruments such as 3-month and 6-month CDs. And those
safest investments pay the least of all in interest.

Income

Investors who focus on income may buy some of the same fixed-income assets that are described above. But their
priorities shift towards income. They're looking for assets that guarantee a steady income supplement. And to get
there they may accept a bit more risk.

This is often the priority of retirees who want to generate a stable source of monthly income while keeping up with
inflation.

Government and corporate bonds may be in the mix, and an income investor may go beyond the safest AAA-rated
choices and will go longer than short-term CDs.

The ratings are assigned by a rating agency that evaluates the financial stability of the company or government
issuing the bond. Bonds rated at A or AA are only slightly riskier than AAA bonds but offer a higher rate of return.
BBB-rated bonds carry a medium risk but more income.

Below that, you're in junk bond territory and the word safety does not apply.

Income investors may also buy preferred stock shares or common stocks that historically pay good dividends.

Capital Growth

By definition, capital growth is achieved only by selling an asset. Stocks are capital assets. Barring dividend
payments, their owners have to cash them in to realize gains.

23
There are many other types of capital growth assets, from diamonds to real estate. What they all share is some
degree of risk to the investor. Selling at lower than the price paid is referred to as a capital loss.

The stock markets offer some of the most speculative investments available since their returns are unpredictable.
But there is risky and riskier.

Blue-chip stocks are generally considered the best of the bunch as many of them offer reasonable safety, modest
income from dividends, and potential for capital growth over the long term.

Growth stocks are for those who can tolerate some ups and downs. These are the fast-growing young companies
that may grow up to be Amazons. Or they might crash spectacularly.

Secondary Objectives

Safety, income, and capital gains are the big three objectives of investing. But there are others that should be kept
in mind when they choose investments.

Tax Minimization: Some investors pursue tax minimization as a factor in their choices. A highly-paid executive, for
example, may seek investments with favorable tax treatment to lessen the overall income tax burden.

Contributing to an individual retirement account or any other tax-advantaged retirement plan is a highly effective tax
minimization strategy for all of us.

Liquidity: Investments such as bonds or bond funds are relatively liquid, meaning they can in many cases be
converted into cash quickly and with little risk of loss. Stocks are less liquid since they can be sold easily but selling
at the wrong time can cause a serious loss.

Many other investments are illiquid. Real estate or art can be excellent investments unless you are forced to sell
them at the wrong time.

The safest investments are found in the money market. They include T-bills, CDs, commercial paper, or bankers'
acceptance slips. Other safe investments include highly-rated government and corporate bonds.

Balancing Safety, Growth, and Capital Gains

For most investors, the answer does not lie in a single choice among safety, growth, or capital gains. The best
choice is a mix of all three that meets your needs.

And remember, that changes over time. Your appetite for capital gains may be highest when you're at the start of
your career and can withstand a lot of risk. As you approach retirement, you might prioritize holding onto that nest
egg and dial down the risk.

At any stage, though, your portfolio will probably reflect one pre-eminent objective with all other potential objectives .

24
 CHAPTER – 3

PROCESS OF INVESTMENT :--

1. Investment Process

Achieving financial success is a complex and confusing process—one that requires a significant amount
of time, knowledge, and resources. Our services are designed to help protect, preserve, and
pursue your wealth by employing prudent investment strategies to help you target financial success.

We follow a well-defined, time-proven process to increase the probability that your financial goals
will be met. Our process is built around you—your needs and objectives, your time frame and risk
tolerance. As any of these pieces changes, our ongoing management and monitoring process
ensures that your investment portfolio evolves with you.

Our 5-step wealth management process is designed to respond to your individual needs while
responding to the dynamics of the financial markets.

Step 1: Determine Your Investment Objectives

and Risk Profile

Through personal consultations, we will develop a personal profile of your individual investment needs and objectives
and time horizon. We will help you determine whether you need investments that generate income, offer growth
potential, or a combination of both. It is also critical to understand risk, the types of risk that you potentially face, and
your attitude toward these risks.

25
 Step 2: Set Your Asset Allocation Policy

Research has shown that the asset allocation decision—how your investments are diversified among various asset
classes (stocks, bonds, real estate, and cash)—has the most significant impact on overall portfolio performance.

We follow the principles of Modern Portfolio Theory, which earned a Nobel Prize in Economics in 1990 for Dr. William
Sharpe and Dr. Harry Markowitz. This theory forms the basis of a well-known asset allocation technique called
Capital Asset Pricing Model (CAPM). Using this highly sophisticated technique, we draw on decades' worth of market
data and analysis to assess the likely behavior of your portfolio.

Step 3: Implementation

Once your asset allocation policy has been developed, we implement your investment strategy by investing in a well-
diversified portfolio managed by pre-eminent money managers.

In addition, any needed legal documents would be drafted (will, trust, power of attorney, health care proxy, etc.).
Titling of assets is also coordinated.

Our plans are designed and implemented with prudent flexibility to assure the strategies can be responsive in an
ever-changing world.

Step 4: Rebalance Your Portfolio

Rebalancing is a disciplined method of ensuring that your portfolio is being managed in a manner consistent with your
designated asset allocation policy. Once your portfolio is implemented, it is carefully monitored, on an ongoing basis,
to ensure that it remains consistent with your desired asset allocation strategy.

Without rebalancing, the mix of assets in your portfolio may become inconsistent with your asset allocation policy.

26
This can occur over time as different asset classes increase or decrease in value and can result in unplanned
overexposure or underexposure to certain asset classes.

Step 5: Communication

We will communicate with you on a regular basis and provide various reports, including account
performance and detailed account statements.

We establish reviews to evaluate your plan's performance and to make any necessary adjustment
due to changing laws, market conditions, objectives, and/or investment performance.

In addition, we send out, via e-mail, weekly and monthly market commentaries. These commentaries
are also posted on our website

27
HOW TO START ONLINE TRADING :-

Millions of neophytes try their hand at the market casino each year, but most walk away a little poorer and a lot
wiser, having never reached their full potential. The majority of those who fail have one thing in common: They
haven't mastered the basic skills needed to tilt the odds in their favor. However, if one takes adequate time to learn
them, it's possible to be on the way to increasing one's odds of success.

World markets attract speculative capital like moths to a flame; most people throw money at securities without
understanding why prices move higher or lower. Instead, they chase hot tips, make binary bets, and sit at the feet of
gurus, letting them recommend buy-and-sell decisions that make no sense. A better path is to learn how to trade the
markets with skill and authority.

Start with a self-examination that takes a close look at your relationship with money. Do you view life as a struggle,
with a difficult effort required to earn each dollar? Do you believe personal magnetism will attract market wealth to
you in the same way it does in other life pursuits? More ominously, have you lost money on a regular basis through
other activities and hope the financial markets will treat you more kindly? 

Whatever your belief system, the market is likely to reinforce that internal view again through profits and
losses. Hard work and charisma both support financial success, but losers in other walks of life are likely to turn into
losers in the trading game. Don't panic if this sounds like you. Instead, take the self-help route and learn about the
relationship between money and self-worth.

KEY TAKEAWAYS

 Learning how to trade the financial markets begins with educating oneself on reading the financial markets
via charts and price action.
 Use technical analysis, in conjunction with fundamental analysis, to decipher price action.
 Practice makes perfect or, at the very least, it allows the neophyte to test out theories before committing
real funds.
When you get your head on straight, you can embark on learning trading and start with these five basic steps.

How to Trade Stocks

Want to trade but don't know where to start?
 
millions of neophytes try their hand at the market casino each year, bF most walk away a little poorer and a lot

wiser, having never reached their full potential. The majority of those who fail have one thing in common: They

28
haven't mastered the basic skills needed to tilt the odds in their favor. However, if one takes adequate time to learn

them, it's possible to be on the way to increasing one's odds of success.

World markets attract speculative capital like moths to a flame; most people throw money at securities without
understanding why prices move higher or lower. Instead, they chase hot tips, make binary bets, and sit at the feet of
gurus, letting them recommend buy-and-sell decisions that make no sense. A better path is to learn how to trade the
markets with skill and authority.

Start with a self-examination that takes a close look at your relationship with money. Do you view life as a struggle,
with a difficult effort required to earn each dollar? Do you believe personal magnetism will attract market wealth to
you in the same way it does in other life pursuits? More ominously, have you lost money on a regular basis through
other activities and hope the financial markets will treat you more kindly? 

Whatever your belief system, the market is likely to reinforce that internal view again through profits and
losses. Hard work and charisma both support financial success, but losers in other walks of life are likely to turn into
losers in the trading game. Don't panic if this sounds like you. Instead, take the self-help route and learn about the
relationship between money and self-worth.

KEY TAKEAWAYS

 Learning how to trade the financial markets begins with educating oneself on reading the financial markets
via charts and price action.
 Use technical analysis, in conjunction with fundamental analysis, to decipher price action.
 Practice makes perfect or, at the very least, it allows the neophyte to test out theories before committing
real funds.
When you get your head on straight, you can embark on learning trading and start with these five basic steps.

1. Open a Trading Account

Sorry if it seems we're stating the obvious, but you never know! (Remember the person who did everything to set up
his new computer—except to plug it in?) Find a good online stock broker and open a stock brokerage account. Even
if you already have a personal account, it's not a bad idea to keep a professional trading account separate. Become
familiar with the account interface and take advantage of the free trading tools and research offered exclusively to
clients. A number of brokers offer virtual trading. Some sites, including Investopedia, also offer online broker
reviews to help you find the right broker.

2. Learn to Read: A Market Crash Course

Financial articles, stock market books, website tutorials, etc. There's a wealth of information out there, much of it
inexpensive to tap. It's important not to focus too narrowly on one single aspect of the trading game. Instead, study
everything market-wise, including ideas and concepts you don't feel are particularly relevant at this time. Trading
launches a journey that often winds up at a destination not anticipated at the starting line. Your broad and detailed

29
market background will come in handy over and over again, even if you think you know exactly where you’re going
right now.

Here are five must-read books for every new trader:

1. Stock Market Wizards by Jack D. Schwager

2. Trading for a Living  by Dr. Alexander Elder
3. Technical Analysis of the Financial Markets by John Murphy
4. Winning on Wall Street by Martin Zweig
5. The Nature of Risk by Justin Mamis

Start to follow the market every day in your spare time. Get up early and read about overnight price action on
foreign markets. (U.S. traders didn't have to monitor global markets a couple of decades ago, but that’s all changed
due to the rapid growth of electronic trading and derivative instruments that link equity, forex, and bond markets
around the world.)

News sites such as Yahoo Finance, Google Finance, and CBS MoneyWatch serve as great resources for new
investors. For more sophisticated coverage, you need look no further than The Wall Street Journal and Bloomberg.

3. Learn to Analyze

Study the basics of technical analysis and look at price charts—thousands of them—in all time frames. You may
think fundamental analysis offers a better path to profits because it tracks growth curves and revenue streams, but
traders live and die by price action that diverges sharply from underlying fundamentals. Do not stop reading
company spreadsheets, because they offer a trading edge over those who ignore them. However, they won’t help
you survive your first year as a trader.

Your experience with charts and technical analysis now brings you into the magical realm of price
prediction. Theoretically, securities can only go higher or lower, encouraging a long-side trade or a short sale. In
reality, prices can do many other things, including chopping sideways for weeks at a time or whipsawing violently in
both directions, shaking out buyers and sellers.

The time horizon becomes extremely important at this juncture. Financial markets grind out trends and trading
ranges with fractal properties that generate independent price movements at short-term, intermediate-term, and
long-term intervals. This means a security or index can carve out a long-term uptrend, intermediate downtrend, and
a short-term trading range, all at the same time. Rather than complicate prediction, most trading opportunities will
unfold through interactions between these time intervals. 

Buying the dip offers a classic example, with traders jumping into a strong uptrend when it sells off in a smaller time
period. The best way to examine this three-dimensional playing field is to look at each security in three time frames,
starting with 60-minute, daily, and weekly charts.

4. Practice Trading

It’s now time to get your feet wet without giving up your trading stake. Paper trading, or virtual trading, offers a
perfect solution, allowing the neophyte to follow real-time market actions, making buying and selling decisions that
form the outline of a theoretical performance record. It usually involves the use of a stock market simulator that has
the look and feel of an actual stock exchange's performance. Make lots of trades, using different holding periods
and strategies, and then analyze the results for obvious flaws. 

30
Investopedia has a free stock market game, and many brokers let clients engage in paper trading with their real
money entry systems, too. This has the added benefit of teaching the software so you don’t hit the wrong buttons
when you are playing with family funds. 

So, when do you make the switch and start trading with real money? There’s no perfect answer because simulated
trading carries a flaw that’s likely to show up whenever you start to trade for real, even if your paper results look
perfect.

Traders need to coexist peacefully with the twin emotions of greed and fear. Paper trading doesn’t engage these
emotions, which can only be experienced through actual profit and loss. In fact, this psychological aspect forces
more first-year players out of the game than bad decision-making. Your baby steps forward as a new trader need to
recognize this challenge ad address remaining issues with money and self-worth.

5) Other Ways to Learn and Practice Trading

Though experience is a fine teacher, don't forget about additional education as you proceed on your trading career.
Whether online or in-person, classes can be beneficial, and you can find them at levels ranging from novice (with
advice on how to analyze the aforementioned analytic charts, for example) to pro. More specialized seminars—
often conducted by a professional trader—can provide valuable insight into the overall market and
specific investment strategies. Most focus on a specific type of asset, a particular aspect of the market, or a trading
technique. Some may be academic, while others are more like workshops in which you actively take positions, test
out entry and exit strategies, and engage in other exercises (often with a simulator).

Paying for research and analysis can be both educational and useful. Some investors may find watching or
observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There
are a slew of paid subscription sites available across the web: Two well-respected services include Investors.com
and Morningstar.

It's also useful to get yourself a mentor—a hands-on coach to guide you, critique your technique, and offer advice. If
you don't know one, you can buy one. Many online trading schools offer mentoring as part of their continuing ed
programs.

31
 How to Trade Stocks

Want to trade but don't know where to start?

 

Millions of neophytes try their hand at the market casino each year, but most walk away a little poorer and a lot

wiser, having never reached their full potential. The majority of those who fail have one thing in common: They

haven't mastered the basic skills needed to tilt the odds in their favor. However, if one takes adequate time to learn

them, it's possible to be on the way to increasing one's odds of success.

World markets attract speculative capital like moths to a flame; most people throw money at securities without
understanding why prices move higher or lower. Instead, they chase hot tips, make binary bets, and sit at the feet of
gurus, letting them recommend buy-and-sell decisions that make no sense. A better path is to learn how to trade the
markets with skill and authority.

Start with a self-examination that takes a close look at your relationship with money. Do you view life as a struggle,
with a difficult effort required to earn

each dollar? Do you believe personal magnetism will attract market wealth to you in the same way it does in other
life pursuits? More ominously, have you lost money on a regular basis through other activities and hope the financial
markets will treat you more kindly? 

Whatever your belief system, the market is likely to reinforce that internal view again through profits and
losses. Hard work and charisma both support financial success, but losers in other walks of life are likely to turn into
in the trading game. Don't panic if this sounds like you. Instead, take the
losers
self-help route and learn about the relationship between money and self-
worth.

KEY TAKEAWAYS

 Learning how to trade the financial markets begins with educating oneself on reading the financial markets
via charts and price action.
 Use technical analysis, in conjunction with fundamental analysis, to decipher price action.
 Practice makes perfect or, at the very least, it allows the neophyte to test out theories before committing
real funds.

32
When you get your head on straight, you can embark on learning trading and start with these five basic steps.

1. Open a Trading Account

Sorry if it seems we're stating the obvious, but you never know! (Remember the person who did everything to set up
his new computer—except to plug it in?) Find a good online stock broker and open a stock brokerage account. Even
if you already have a personal account, it's not a bad idea to keep a professional trading account separate. Become
familiar with the account interface and take advantage of the free trading tools and research offered exclusively to
clients. A number of brokers offer virtual trading. Some sites, including Investopedia, also offer online broker
reviews to help you find the right broker

2. Learn to Read: A Market Crash Course

3.
Financial articles, stock market books, website tutorials, etc. There's a wealth of information out there, much of it
inexpensive to tap. It's important not to focus too narrowly on one single aspect of the trading game. Instead, study
everything market-wise, including ideas and concepts you don't feel are particularly relevant at this time. Trading
launches a journey that often winds up at a destination not anticipated at the starting line. Your broad and detailed
market background will come in handy over and over again, even if you think you know exactly where you’re going
right now.

Here are five must-read books for every new trader:

1. Stock Market Wizards by Jack D. Schwager

2. Trading for a Living  by Dr. Alexander Elder
3. Technical Analysis of the Financial Markets by John Murphy
4. Winning on Wall Street by Martin Zweig
5. The Nature of Risk by Justin Mamis

Start to follow the market every day in your spare time. Get up early and read about overnight price action on
foreign markets. (U.S. traders didn't have to monitor global markets a couple of decades ago, but that’s all changed
due to the rapid growth of electronic trading and derivative instruments that link equity, forex, and bond markets
around the world.)

News sites such as Yahoo Finance, Google Finance, and CBS MoneyWatch serve as great resources for new
investors. For more sophisticated coverage, you need look no further than The Wall Street Journal and Bloomberg.

4. Learn to Analyze

Study the basics of technical analysis and look at price charts—thousands of them—in all time frames. You may
think fundamental analysis offers a better path to profits because it tracks growth curves and revenue streams, but
traders live and die by price action that diverges sharply from underlying fundamentals. Do not stop reading
company spreadsheets, because they offer a trading edge over those who ignore them. However, they won’t help
you survive your first year as a trader.

Your experience with charts and technical analysis now brings you into the magical realm of price
prediction. Theoretically, securities can only go higher or lower, encouraging a long-side trade or a short sale. In
reality, prices can do many other things, including chopping sideways for weeks at a time or whipsawing violently in
both directions, shaking out buyers and sellers.

The time horizon becomes extremely important at this juncture. Financial markets grind out trends and trading
ranges with fractal properties that generate independent price movements at short-term, intermediate-term, and
long-term intervals. This means a security or index can carve out a long-term uptrend, intermediate downtrend, and

33
a short-term trading range, all at the same time. Rather than complicate prediction, most trading opportunities will
unfold through interactions between these time intervals. 

Buying the dip offers a classic example, with traders jumping into a strong uptrend when it sells off in a smaller time
period. The best way to examine this three-dimensional playing field is to look at each security in three time frames,
starting with 60-minute, daily, and weekly charts.

5. Practice Trading

It’s now time to get your feet wet without giving up your trading stake. Paper trading, or virtual trading, offers a
perfect solution, allowing the neophyte to follow real-time market actions, making buying and selling decisions that
form the outline of a theoretical performance record. It usually involves the use of a stock market simulator that has
the look and feel of an actual stock exchange's performance. Make lots of trades, using different holding periods
and strategies, and then analyze the results for obvious flaws. 

Investopedia has a free stock market game, and many brokers let clients engage in paper trading with their real
money entry systems, too. This has the added benefit of teaching the software so you don’t hit the wrong buttons
when you are playing with family funds. 

So, when do you make the switch and start trading with real money? There’s no perfect answer because simulated
trading carries a flaw that’s likely to show up whenever you start to trade for real, even if your paper results look
perfect.

Traders need to coexist peacefully with the twin emotions of greed and fear. Paper trading doesn’t engage these
emotions, which can only be experienced through actual profit and loss. In fact, this psychological aspect forces
more first-year players out of the game than bad decision-making. Your baby steps forward as a new trader need to
recognize this challenge and address remaining issues with money and self-worth.

6. Other Ways to Learn and Practice Trading

Though experience is a fine teacher, don't forget about additional education as you proceed on your trading career.
Whether online or in-person, classes can be beneficial, and you can find them at levels ranging from novice (with
advice on how to analyze the aforementioned analytic charts, for example) to pro. More specialized seminars—
often conducted by a professional trader—can provide valuable insight into the overall market and
specific investment strategies. Most focus on a specific type of asset, a particular aspect of the market, or a trading
technique. Some may be academic, while others are more like workshops in which you actively take positions, test
out entry and exit strategies, and engage in other exercises (often with a simulator).

Paying for research and analysis can be both educational and useful. Some investors may find watching or
observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There
are a slew of paid subscription sites available across the web: Two well-respected services include Investors.com
and Morningstar.

It's also useful to get yourself a mentor—a hands-on coach to guide you, critique your technique, and offer advice. If
you don't know one, you can buy one. Many online trading schools offer mentoring as part of their continuing ed
programs.

How to Manage Risk

34
When up and running with real money, you need to address position and risk management. Each position carries a holding period
and technical parameters that favor profit and loss targets, requiring your timely exit when reached.

Risk management techniques will vary in complexity and will depend on your particular strategy, but there are some overall tips.
Know your entry and exit points and stick to them, unless you have a good and objective reason to change them. Set stop-
losses and take-profit orders accordingly. Cut losses early and avoid the emotional or psychological urge to take on ever greater
risk in hopes of breaking even. More importantly, don't panic.

If you're building a long-term buy-and-hold portfolio, diversification can lower your overall risk without sacrificing expected return.
Also think about when to rebalance your portfolio as markets move over time.

If you haven't done so already, now is the time to start a daily journal that documents all of your trades, including the reasons for
taking risks, as well as the holding periods and final profit or loss numbers. This diary of events and observations sets the
foundation for a trading edge that will end your novice status and let you take money out of the market on a consistent basis.

What Are the Main Differences Between Trading and Investing

(a) investing time horizon: this can span years or decades because the objective is long-term
wealth accumulation, while trading involves much shorter time spans, ranging from less than a day to a few months;

(b) number of trades: because investing generally means buy and hold, the number of trades is usually much
lower than in trading, where frequent trades are the norm; and (c) type of trades: investing typically involves long positions only,
while trading may include long and short positions to benefit from both higher and lower market moves.

What Are Some Common Trading Strategies?

Common trading strategies include following the trend, or buying when the market is rising and short selling when it
is declining; contrarian trading, or going against the herd; scalping, which involves exploiting minute price gaps
caused by the bid-ask spread; and trading the news.

Is Technical Analysis or Fundamental Analysis More Important

for Trading?

Because technical analysis looks at the short-term picture and can help you to identify short-term trading patterns
and trends, it is better suited to trading than fundamental analysis, which takes a longer-term view.

35
 What Traits Are Necessary to Become a Successful Trader?

In addition to knowledge and experience, the most important traits for a trader are discipline and mental fortitude.
Discipline is necessary to stick to one's trading strategy in the face of daily challenges; without trading discipline,
small losses can turn into huge ones. Mental fortitude is required to bounce back from the inevitable setbacks and
bad trading days that will occur in every trader's career. Trading acumen is another requisite trait for trading
success, but that can be developed over the years through knowledge and experience.

The Bottom Line

Start your trading journey with a deep education on the financial markets and then read charts and watch price
actions, building strategies based on your observations. Test these strategies with paper trading, while analyzing
results and making continuous adjustments. Then complete the first leg of your journey with monetary risk that
forces you to address trade management and market psychology issues.

SOME RELATED TERMS FOR INVESTMENT

INSTRUMENTS
possibility of foreign exchanges becoming price setters for the India Market and the growing market share of SGX through a
slew of protectionist measures.

Related Terms

Financial Instrument

A financial instrument is defined as a contract between individuals/parties that holds a monetary value.  

Prospectus

A prospectus is defined as a legal document describing a company’s securities that have been put on sale.  

36


harshad mehta scam

The 1992 stock market scam is often referred to by the perpetrator’s name who brought about the downfall
of the stock market: Harshad Shantilal Mehta.  

break even analysis

Break-even analysis informs the decision maker as to how many units of a product must be sold to cover the
fixed and variable costs of production.  

annuity

An annuity is a contract between you and any insurance company in which you make a lump-
sum payment and, in return, receive regular disbursements, starting either immediately or at some point in
the future.  

Green Levy

Green levy seeks to encourage corporations to adopt eco-friendly technologies.  

Recent Terms


37
 Cloud Mining

Cloud mining is a remote mining service that is provided by cryptocurrency mining hosts individuals
interested in participating in the process in order to earn or gain some returns from the process.  

Mark to Market, MTM

It refers to the realistic estimate of the financial situation of the market depending on the assets and
liabilities present.  

Profitability Index

Also known as the Value Investment Ratio or Profit Investment Ratio, the Profitability Index represents the
relationship between the costs and the benefits of a proposed project.  

fear and greed index

Greed and fear index relate to an old Wall Street saying that goes, “financial markets are driven by two
powerful emotions – greed and fear.  


Recency Bias

It is a psychological phenomenon where an individual gives greater importance to recent events as

compared to what had happened before.  

38
 

Interim Dividend

Companies have the option of raising capital through two major asset classes namely, debt and equity.

 Right Time to Invest in Stock

Whether you are a newcomer or an experienced hand, the eternal question in trading is always - what is the best time to buy (or
sell) stocks? While many deny it, some basic rules minimize your risks and offer you a higher chance of profit. Here are 4 simple
recommendations on the right time to invest in stock

This is most applicable to intraday traders who buy and sell their stocks and make their profits within the trading hours on a
single day. Logically, it may seem tedious to watch the market throughout the trading hours for an opportunity to buy or sell.
However, this is not true for the following reasons:

 Too many hours watching charts and graphs causes mental fatigue and confusion.
 The volatility drops after the first 90 minutes.
 The volume in which stocks are traded might also drop after the first 90 minutes.
 You will face seasoned traders whose moves might leave you flustered. Experienced traders are looking to manipulate
rates and turn graphs around - this is no time for a beginner to experiment.

With all these factors taken into consideration, the best time of day to trade is 9:30 to 10:30 am. The stock market opens for
trading at 9:15 AM and in the first 15 minutes, the market is still responding to the previous day's news with experienced traders
waiting to make their move. As a result, that first 15-minute slot is best avoided. If you prefer more time to make your
observations to make a more informed decision, stretch your trading time to a maximum of 11 am.

The Most Lucrative Day

Many forums will tell you that Monday is the best day to buy stocks, while Friday is the best day to sell stocks. The logic behind
this advice is that stock prices are said to be at the lowest on a Monday (meaning you will buy shares at a lower price). The same
contention goes on to say that stock prices are at their highest on a Friday (meaning that you will sell at a higher price). However,
if everyone played that game then there would be no sellers on a Monday- everyone would only want to buy. Similarly, there

39
would be no buyers on a Friday because all traders would only want to sell. This would mess with demand-supply economics.
There is no such thing as a standard best day of the week.

The Most Favourable Conditions

The best time to buy stocks is when the share prices of a given stock are at a low. There is always a chance that they will drop
even further, but buying at a low price is significantly safer than buying at a high price where the price of the stock is unlikely to
climb much higher. Instead, prices may drop and you will end up having to sell at a loss. When you buy shares at a low price,
they may drop further but there is a significantly higher chance that they will soon turn around and rise, giving you the chance to
sell at a profit.

The best time to invest in F&O or to buy F&O contracts is when Open Interest, i.e. OI is low because it means that people are
keen to sell and this usually means lower buy rates.

Other factors

Check the share prices of your chosen stock to know when is a good time to buy. An indicator called Moving Averages tells you
the range of your stock price, which is the highest it ever rises and the lowest it ever falls, thereby helping you make a better
decision. Additionally, watch for news related to your stock. Good news and dividend payouts can often result in a stock price
rising.

Conclusion

It is safe to say that you must research and observe the charts, indicators and news around your preferred stocks. Avoid spending
every single minute of every single day with your online trading account open on your screen. Watching the stock market and
trying to cash in on every opportunity will end up being counter-productive. Be diligent in ensuring you are informed about the
simple recommendations discussed in th

CHAPTER- 4

DEMAT ACCOUNT:--

40
Demat Account

With technology advancements, the concept of demat account has been widely accepted and thus, made mandatory

to deal in stock market. Online free demat account holds all investment and securities such as shares, bonds, and

mutual funds in one place, while providing a convenient and hassle-free platform to keep a track of stock market.

What is Demat Account?

As mentioned above, demat account is a dematerialized account that is primarily used to electronically or digitally

hold shares and securities. The idea of dematerialized account was introduced back in the year 1996 as an

alternative to physical share certificates and soon the concept was widely popularly. This is because demat account

was far easier, convenient and hassle-free to manage when compared to physical share certificates. In addition, it

also eliminates the risks associated with physical share certificates such as wear & tear, damage, lost, forgery, and

theft.

Unlike physical share certificates, demat account can be used to hold a wide variety of investments including ETFs,

equity shares, bonds, mutual funds, debt securities, and government securities. Most importantly, demat account can

also be used to buy and sell the shares and securities in just one click. In India, it is mandatory to open demat

account to invest and trade in the stock market. Depositories such as National Securities Depository Limited (NSDL)

and Central Depository Services (CDSL).

Importance of Demat account

A Demat account provides a digitally secure and convenient way of holding shares and securities. It eliminates theft,

forgery, loss and damage of physical certificates. With a Demat account, you can transfer securities immediately.

41
Once the trade is approved, the shares are digitally transferred to your account. Moreover, in case events like stock

bonuses, mergers, etc., you get shares automatically into your account. Your Demat account information regarding

these activities is available online by simply logging into the website. You can trade on-the-go using your smartphone

or desktop. So, you needn’t visit the stock exchange to transact. You also enjoy the benefit of reduced transaction

costs because there is no stamp duty involved with the transfer of shares. These features and benefits of a Demat

account encourage a larger trade volume by investors, thus increasing the potential for lucrative returns.

Demat account has made it easier to handle stocks. The Indian exchanges now follow the settlement cycle of T+2

days facilitated by the Demat account. You pay the seller on the second business day when you buy shares following

the settlement cycle, and your Demat account gets automatically credited with the purchased securities. Demat

account has made the process of security trading seamless and hassle-free.

Angel One – Share Market Trading and Stock Broking

Open an Account

Home › Knowledge Center › What Is Demat Account

What Is Demat Account

6 mins read

7 by Angel One

EN

We all know about savings accounts with banks. It allows easy access to our funds while offering security from theft

and mishandling. A Demat account does the same for investors. Nowadays, the Demat account is a prerequisite for

stock investment.

42
Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat

account is a dematerialised account. The purpose of opening a Demat account is to hold shares that have been

bought or dematerialised (converted from physical to electronic shares), thus making share trading easy for the users

during online trading.

In India, depositories such as NSDL and CDSL provide Free Demat account services. Intermediaries, depository

participants or stockbrokers – like Angel One – facilitate these services. Each intermediary may have Demat account

charges that vary as per volume held in the account, type of subscription, and terms and conditions between a

depository and a stockbroker.

What is Demat account?

A Demat Account or Dematerialised Account provides the facility of holding shares and securities in an electronic

format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the

users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-

traded funds, bonds and mutual funds in one place.

Demat enabled the digitisation process of the Indian stock trading market and enforced better governance by SEBI.

In addition, the Demat account reduced the risks of storing, theft, damage, and malpractices by storing securities in

electronic format. It was first introduced in 1996 by NSE. Initially, the account opening process was manual, and it

took investors several days to get it activated. Today, one can open a Demat account online in 5 mins. The end-to-

end digital process has contributed to popularising Demat, which skyrocketed in the pandemic.

What is dematerialisation?

43
Dematerialisation is the process of converting the physical share certificates into electronic form, which is a lot easier

to maintain and is accessible from anywhere throughout the world. An investor who wants to trade online needs to

open a Demat with a Depository Participant (DP). The purpose of dematerialisation is to eliminate the need for the

investor to hold physical share certificates and facilitating a seamless tracking and monitoring of holdings.

Earlier, the share certificate issuance process was time-consuming and cumbersome, which Demat has helped

transform by speeding the entire process and storing security certificates in digital format. Once your Demat account

is active, you can convert paper certificates into digital format by submitting all your physical securities along with a

Dematerialisation Request Form (DRF). Also, remember to deface each physical certificate by mentioning ‘

Surrendered for Dematerialisation’ on it. You will receive an acknowledgement slip when you surrender your share

certificates.

How to Create a Portfolio in Share Market

How to Create a Portfolio in Share Market

How to Open a Demat Account

How to Open a Demat Account

Documents Required For A Demat Account

Documents Required For A Demat Account

Features & Benefits of Opening a Demat account

Features & Benefits of Opening a Demat account

How to Use a Demat account?

How to Use a Demat account?

44
Demat Account Concepts & Processes

Demat Account Concepts & Processes

Dematerialisation- An Overview

Dematerialisation- An Overview

Benefits Of Dematerialisation

Benefits Of Dematerialisation

5 things to check before opening a demat account

5 things to check before opening a demat account

Demat Account Basics

Demat Account Basics

Various Types of Trading Accounts and Demat Accounts

Various Types of Trading Accounts and Demat Accounts

Who is offering lowest brokerage options in India?

Who is offering lowest brokerage options in India?

What are bonus shares?

What are bonus shares?

What is a collateral amount in Demat account?

What is a collateral amount in Demat account?

Difference between Dematerialisation vs. Rematerialisation

45
Difference between Dematerialisation vs. Rematerialisation

How to know your Demat account number?

How to know your Demat account number?

Transfer shares from one Demat account to another

Transfer shares from one Demat account to another

How to link your Aadhaar number with Demat account?

How to link your Aadhaar number with Demat account?

How to convert physical shares to Demat

How to convert physical shares to Demat

Minor demat account

Minor demat account

How to choose the best demat account

How to choose the best demat account

Demat account charges

Demat account charges

How to Transfer Money from Demat Account to Bank Account

How to Transfer Money from Demat Account to Bank Account

How to Transfer Shares from One Demat Account to Another

How to Transfer Shares from One Demat Account to Another

46
LOAD MORE

Importance of Demat account

A Demat account provides a digitally secure and convenient way of holding shares and securities. It eliminates theft,

forgery, loss and damage of physical certificates. With a Demat account, you can transfer securities immediately.

Once the trade is approved, the shares are digitally transferred to your account. Moreover, in case events like stock

bonuses, mergers, etc., you get shares automatically into your account. Your Demat account information regarding

these activities is available online by simply logging into the website. You can trade on-the-go using your smartphone

or desktop. So, you needn’t visit the stock exchange to transact. You also enjoy the benefit of reduced transaction

costs because there is no stamp duty involved with the transfer of shares. These features and benefits of a Demat

account encourage a larger trade volume by investors, thus increasing the potential for lucrative returns.

Demat account has made it easier to handle stocks. The Indian exchanges now follow the settlement cycle of T+2

days facilitated by the Demat account. You pay the seller on the second business day when you buy shares following

the settlement cycle, and your Demat account gets automatically credited with the purchased securities. Demat

account has made the process of security trading seamless and hassle-free.

Benefits of Demat account

Seamless and fast transfer of shares

Facilitates digitally secured storing of securities

47
Eliminates theft, forgery, loss and damage of security certificates

Easy tracking of trading activities

All-time access

Allows to add beneficiaries

Automatic credit of bonus stocks, rights issues, split shares

How does a Demat Account work?

Trading through a Demat account is similar to the procedure of physical trading, except that a Demat account is

electronic. You begin trading by placing an order through your online trading account. For this purpose, it is

necessary to link both trading and Demat accounts. Once an order is placed, the exchange will process the order.

Demat account details the market price of shares and the availability of shares is verified before the final processing

of the order. On completion of the processing, shares are then reflected in your statement of holdings. When a

shareholder wishes to sell shares, a delivery instruction note has to be provided with details of the stock. Shares are

then debited from the account and the equivalent cash value is credited to the trading account.

Having a Demat account is compulsory per the Depository Act passed in 1996. To facilitate it, the National Securities

Depository Limited (NSDL) was formed in 1996. And, the Central Depository Services Limited (CDSL) became the

second such institution three years later. Together the two agencies are the custodian of all the electronic securities

held by investors. They offer the Demat account opening service through various depository participants, like Angel

One. Both agencies and their partner brokers are registered with SEBI.

The Demat account opening process involves three parties – your bank, the depository participant, and the

depository. Tagging your bank account with your Demat account is critical for trading seamlessly. Linking your

account details ensure when you buy shares, the money gets debited directly from your bank account, and when you

sell, the proceeds get automatically credited.

48
A depository participant can be a non-banking financial institution, a bank, or a stockbroker. You would need to

approach a DP to open a Demat account. The third party is obviously the depository. They hold the Demat account

on your behalf.

Types of Demat account

While opening a Demat account, investors need to select a Demat account type that suits their profile carefully. The

most common type is a regular Demat account. Any Indian investor or resident Indian can open a standard Demat

account within a few minutes using an online account opening process. Apart from the standard Demat account,

there are two other types. Let’s take a look at them.

There are two types of Demat accounts—Repatriable Demat account and Non-repatriable Demat account.

Repatriable funds are deposited in a separate bank account known as the Non-Resident External Account (NRE

account). Repatriable funds are those funds which can be transferred abroad. The investments made from these

funds are maintained in a The Repatriable Demat account holds the investments made from repatriable funds. On the

other hand, non-repatriable funds (funds which cannot be taken/transferred abroad) are deposited in a different bank

account known as the Non Resident Ordinary Account (NRO account).The Non-repatriable Demat account holds the

investments made from non-repatriable funds. Money can easily be transferred from an NRE to an NRO account.

However, once the transfer is made, the repatriability is lost and the money cannot be transferred back to the NRE

account

Types of Demat account

49
Regular Demat account: Regular Demat account is for resident Indian investors who want to trade in shares alone

and need a storing for securities. The stocks get debited from your Demat account when you sell and credited when

you purchase during trading. If you are trading in F&O, you don’t need a Demat account because these contracts

don’t need storage.

Basic Services Demat Account: It is a new type of Demat account introduced by the SEBI. These accounts don’t

have maintenance changes if the holding value is less than Rs 50,000. Between Rs 50,000 and 2 lakh, the changes

are Rs 100. The new type of account targets new investors who are yet to open a Demat account.

Repatriable Demat Account: Non-resident Indian investors open a repatriable account to transfer their earnings from

the Indian market abroad. If you want to open a repatriable account, you’ll have to close your regular Demat account

in India and open a non-resident external account to receive payments.

Non-repatriable account: This account is also for non-resident Indians, but it doesn’t allow fund transfer to foreign

locations.

SEBI has made it mandatory for investors to have a Demat account. You can’t trade in the Indian stock exchange if

you don’t have a Demat. Update yourself on the account opening process, charges, and select a trusted depository

participant.

There is a list of documents needed to open a Demat account, including personal details and bank/income details.

Here is a list of the documents required.

Proof of identity

Proof of address

Proof of income

Proof of bank account

50
PAN card

Passport size photographs

The online method has made the account opening process simple. You can now set up a Demat account by

submitting documents and completing KYC online.

Benefits of opening a Demat Account with Angel One

Like any other DP, Angel One offers a Demat account opening service that comes with a hoard of benefits.

Angel One is one of the most renowned stockbroking houses in India. The Angel Group is a member of the Bombay

Stock Exchange (BSE), National Stock Exchange (NSE) and the two leading Commodity Exchanges in the country:

NCDEX & MCX. Angel One is also registered as a Depository Participant with CDSL. We are the #1 trusted brand by

more than six million investors.

Main features of an Angel One Demat account

It is free: You can get your Demat account free of cost. We don’t charge for opening a Demat account. However,

there are annual maintenance charges when you maintain an account with us.

Easy tracking: When you open the Demat, you get qualified to receive monthly statements on your mobile and email

id. The tracking features allow you to watch account activities and manage actions.

Seamless service: We allow seamless and fast linking with your bank account for a holistic experience. You can

transact seamlessly with more than forty banks through net banking and UPI.

51
Complete trading ecosystem: Angel One Demat account has an ecosystem of the trading platform, apps, and tools

attached for a better trading experience.

Benefits, offers, and rewards: With the Angel One Demat account, you gain access to offers, rewards, and benefits

offered by the company.

CHAPTER NO. 5

MUTUAL FUNDS :-

52
A mutual fund is a company that brings together money from many people and invests it in stocks,
bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known
as its portfolio.

Advantages
EditIncreased opportunity for diversification: A fund diversifies by holding many securities. This
diversification decreases risk.

Daily liquidity: In the United States, mutual fund shares can be redeemed for their net asset value within
seven days, but in practice the redemption is often much quicker. This liquidity can create asset–liability
mismatch which poses challenges, which in part motivated an SEC liquidity management rule in 2016.

Professional investment management: Open-and closed-end funds hire portfolio managers to supervise
the fund’s investments.

Ability to participate in investments that may be available only to larger investors. For example,
individual investors often find it difficult to invest directly in foreign markets.

Service and convenience: Funds often provide services such as check writing.

Government oversight: Mutual funds are regulated by a governmental body

Transparency and ease of comparison: All mutual funds are required to report the same information to
investors, which makes them easier to compare to each other.[9]

Disadvantages

Mutual funds have disadvantages as well, which include:

Fees

Less control over the timing of recognition of gains

Less predictable income

53
No opportunity to customize

54
55