Your first Trade

Investing in SIPs, ETFs and stocks requires you to have a trading account. While these are relatively simple to setup, many first time investors do not know how to get about doing these things. This post will give a basic idea about how to set up your trading.

I have worked with ICICI bank setup so what I write here will be relevant for ICICI. If you have account with some other banks, there will be slight variation.

Accounts

You need three separate accounts for trading

1. Netbanking: This is meant to give the money while buying shares or to receive money while selling shares.
2. Demat: This is meant to store the shares or other securities.
3. Trading: This is meant to perform the actual transaction of buying or selling.

Typically you will already have a netbanking account. It is best to open your trading / demat accounts with the same bank so that these three are properly set up automatically. You should talk to your customer service helpline or go to the bank to get these account

First trade

Once the accounts are open you can use the following to check that they are properly set up

1. In your netbanking account, a tab for demat account will become active. Below, you can see the screens for ICICI bank
2. You will receive details of your trading account - this will include the userid, password and the URL to access it.

Once these things are complete, you can login into your trading site and purchase stocks. Before performing your first trade, you need to decide on a share or security to buy. If you have not done so already, I recommend going with GS Nifty Bees. This will basically track the Nifty index and will be one tenth of the Nifty value.

After logging in, you need to go into the Equity page in the Trade & Invest screen. After that, click on the Cash Buy screen. Once you do that, you will see the first image above. Then, you need to select the exchange (select Nifty if you don't know which one to select) and then enter the first 3-4 characters of the share that you want to buy.

As you do that, you will see a list of matching instruments in a drop down as in the second image above. Select the one you want. Then enter the quantity - 1 for the test trade. You can check the price by clicking on the Get Quote link. A new pop up will open up with various prices. The last traded price is a good benchmark - your trade will take place at around the same price. In the order type select Limit and in the limit price, put the highest that you are willing to pay. This should be a few rupees higher than the last traded price.

You can keep the order validity as Day and leave other fields blank. Once you click on buy now, the order will be placed. It will typically be executed immediately. If your netbanking is not properly set up, it may ask you to select / login into the netbanking account. If all goes well, your netbanking account will be debited with the trade amount. 2-3 working days later, the shares will appear in your demat account. Please note that trading works only when the stock markets are open.

Next Steps

Once the whole process is complete, you can use the trading and demat accounts for investment. The SEP / SIP feature can be used to automatically invest a desired amount every month. You can also but futures, options, commodities and currency but these are advanced (and at times risky) items. If you are experimenting, always remember to keep the amounts low and assume that the losses will be high.

If you just want to invest for medium term (3 - 10 years), stick with Index ETFs.