Investing in the stock market can be a wild ride for investors. Unless you make yourself aware of your rights, the chances of trading fraud increase significantly.
Let’s look at the dos and don’ts in the secondary market and how you can avoid the mistakes to improve your profits.
What is a secondary market?
The bulk of trading activities happens in the secondary market. The company releases their shares for the first time in the primary market, and once they get listed, trading happens in the secondary market between traders.
The secondary market is large and diverse. Hence, investors must update themselves on the dos and don’ts to sustain in the long run. You can avoid falling prey to suspicious activities and trading frauds when you approach the share market armed with knowledge and awareness.
Dos of the secondary market
- Always transact with SEBI registered brokers. Fraud in broking is common; hence, SEBI has mandated all brokers to register and obtain a licence to offer financial advisory services.
- Always check the registered broker’s website and ask for a registration certificate before opening a Demat account. Compare the brokerage fees charged by different brokers across the market.
- Carefully check all information available about the company before buying its shares. Do not base trading decisions on trading tips or free investment suggestions by brokers. Always do research before investing in any company shares.
- Company websites, exchange websites, and news sources are excellent sources available to investors to conduct fundamental stock analysis.
- Plan your investing strategy keeping your financial goal in sight. Portfolio diversification is the best way to minimise risk.
- Periodically review your portfolio and transaction statements of your trading account to locate any unauthorised trades in broking.
- Constantly evaluate all possibilities before giving any trading instructions to brokers.
- Always confirm with official sources regarding any news or recent development on the company, instead of relying on media reports.
Don’ts of the secondary market
- Don’t make an investment decision based on the information received from media, friends, or Facebook groups. Always rely on your research.
- Don’t decide to buy or sell without considering the potential risk of the investment. Before investing in a security, evaluate its liquidity and safety aspects.
- Don’t take an investment decision on the tips and broken information received from the agent.
- Don’t get carried by sudden windfall or fall on the security price. Sometimes, market sentiments can cause a sudden rise or fall in the security value. Don’t play on the momentum, and remain focused on your long-term goal.
- Sometimes the market artificially boosts the demand and supply of securities to influence investor sentiment. Don’t get influenced by momentary greed or fear.
- Don’t hesitate to contact the broker in case of any discrepancies.
- Don’t sign blank delivery instruction slips.
- Don’t get carried away by any promise of unrealistic profit made by an agent/broker.
- Don’t base your investment decisions on rumours or news in the media without cross-checking and confirming the information.
- Don’t share your account details and login information with anyone. Check account statements periodically and also change account passwords to safeguard your portfolio.
Secondary market means buying and selling company shares for a profit. New investors can take a long time to feel comfortable in the stock market. Educated investors are assets to the entire economic system. In Angel One, we help investors make informed financial decisions. Open a free online Demat account with Angel One and start investing in various asset classes to bolster your income.
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