How to buy shares?

When a person buys shares of a company, he or she also gets certain rights such as the right to earn dividends and also part-ownership of the company. In order to buy shares, the first step is to open a trading account or Demat (dematerialised) account. These accounts are linked to the account holder’s bank savings accounts to ensure smooth transfer of funds.

Demat and trading accounts are provided by the two depositories, NSDL and CDSL, through brokerage firms. In order to open these accounts, one has to contact a brokerage. There are different brokerage firms and each has its own unique plans and products, a range of charges, which generally range from 0.01 per cent to 0.05 per cent. Some brokerages offer flat rates.

Brokers are to be chosen wisely and with utmost care. In order to buy a share listed on the NSE or BSE, one needs a stock broker. Brokers are of two types a) full service brokers b) discount brokers.

Full service brokers are more expensive. They target investors who need recommendations and guidance. However, in case a person knows the shares s/her wishes to invest in, then employ a discount broker can be prudent and more economical.