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Share Market: Investment Eligibility, Types & Advantages


The share market, also known as the stock market or equity market, is a platform where companies issue shares to the public, and investors can buy and sell these shares to become part-owners of those companies. Before embarking on this journey, it is crucial to understand who is eligible to invest in the share market and what requirements must be met.

Share Market

Any potential investor needs to grasp the basics of this dynamic marketplace. The share market operates as a secondary market, where previously issued shares are traded between buyers and sellers. The primary purpose of the share market is to facilitate capital raising for companies and provide liquidity for shareholders.

Eligibility Criteria for Share Market Investment

  1. Age Criteria: To invest in the share market, you must be of legal age, typically 18 years or above. Minors are not eligible to participate directly in the share market but can do so through a custodian or guardian account.
  2. Identification and KYC (Know Your Customer): Investors must complete the KYC process, which involves submitting relevant identification documents such as an Aadhar card, passport, or driver’s license. This step ensures compliance with regulatory requirements and prevents fraudulent activities.
  3. Bank Account: A valid bank account is a prerequisite for share market investment. Investors must link their trading account to their bank account for seamless fund transfers.
  4. PAN (Permanent Account Number): A PAN card is mandatory for investing in the share market. It is a unique identifier for tax purposes and essential for opening a trading account.
  5. Trading and Demat Account: Investors must open both a trading account and a Demat account with a registered stockbroker and depository participant, respectively. The trading account allows you to buy and sell shares, while the Demat account holds your shares electronically.
  6. Understanding Risk Tolerance: While not a formal eligibility criterion, investors must assess their risk tolerance before entering the share market. The stock market can be volatile, and investors should be prepared for fluctuations in the value of their investments.

Eligible Entities for Share Market Investment

Apart from individual investors, certain entities are also eligible to invest in the share market. Let’s explore them in detail:

  1. Hindu Undivided Family (HUF): HUFs can invest in the share market as a separate legal entity. However, not all members of the HUF can participate in the decision-making process.
  2. Partnership Firms: Registered partnership firms can invest in the share market. The investments are made in the firm’s name, and the profits or losses are shared among the partners per the partnership agreement.
  3. Limited Liability Partnerships (LLPs): LLPs, a hybrid between partnership firms and companies, are also eligible to invest in the share market.
  4. Companies: Private companies and public companies can invest in the share market as part of their treasury operations or investment strategies.
  5. Mutual Funds: Mutual funds pool money from multiple investors and invest in a diversified portfolio of shares, making them an indirect way for individual investors to participate in the share market.
  6. Foreign Institutional Investors (FIIs): FIIs, registered with the Securities and Exchange Board of India (SEBI), can invest in Indian shares subject to certain regulations and restrictions.

Share Market Investment Options & Advantages

Investing in the share market offers a wide array of investment options, each presenting its own set of advantages and minimum costs. As an aspiring investor, understanding these options can empower you to make informed decisions and potentially reap the rewards of the dynamic world of the share market. Let’s explore the various investment choices and their respective benefits:

1. Individual Stocks


  • Potential for High Returns: Investing in individual stocks can lead to substantial returns, especially when you pick companies with strong growth prospects.
  • Ownership and Voting Rights: Owning stocks means you become a partial company owner, giving you voting rights in certain matters during shareholders’ meetings.
  • Flexibility: You can choose which stocks to invest in based on your analysis and market research.

Minimum Cost: Buying individual stocks depends on the market price per share and associated brokerage fees.

2. Mutual Funds


  • Professional Management: Mutual funds are managed by experienced professionals who handle the portfolio and make investment decisions on your behalf.
  • Diversification: By investing in a mutual fund, you gain exposure to a diversified portfolio of stocks, bonds, or other assets, spreading the risk.
  • Affordability: Many mutual funds have low minimum investment requirements, making them accessible to a broader range of investors.

Minimum Cost: The minimum investment amount for mutual funds can vary but is typically lower than individual stock purchases.

3. Exchange-Traded Funds (ETFs)


  • Liquidity: ETFs trade on stock exchanges, providing liquidity throughout the trading day, similar to individual stocks.
  • Diversification: ETFs offer diversification across various assets, sectors, or geographic regions.
  • Low Expense Ratios: ETFs usually have lower expense ratios than mutual funds, leading to lower overall costs.

Minimum Cost: The minimum cost to buy an ETF is the current market price per share plus any applicable brokerage fees.

4. Index Funds


  • Passive Investing: Index funds aim to replicate the performance of a specific market index, providing a passive investment approach.
  • Diversification: Like ETFs and mutual funds, index funds offer diversification across multiple securities, reducing risk.

Minimum Cost: Index funds’ minimum investment is generally lower than actively managed funds.

5. Bonds


  • Steady Income: Bonds offer regular interest payments, making them attractive to investors seeking a steady income stream.
  • Lower Risk: Bonds are generally considered less risky than stocks, providing stability to a diversified portfolio.

Minimum Cost: The minimum investment in bonds depends on the face value of the bond.

6. Systematic Investment Plans (SIPs)


  • Disciplined Investing: SIPs promote disciplined investing by allowing you to invest a fixed amount regularly.
  • Mitigating Market Volatility: Investing regularly through SIPs helps mitigate the impact of market fluctuations through rupee-cost averaging.

Minimum Cost: SIPs have a low minimum investment amount, making them an accessible option for investors with limited funds.

How to Invest in the Share Market as a Beginner?

Investing in the share market can seem daunting for beginners, but it can be a rewarding financial journey with the right knowledge and approach. Here’s a step-by-step guide to help you get started with share market investments:

1. Educate Yourself: Before you start investing, take the time to educate yourself about the share market and how it works. Understand the basics of stocks, mutual funds, ETFs, and other investment options. Numerous online resources, books, and courses are available to help you gain the necessary knowledge.

2. Set Clear Financial Goals: Determine your financial goals and objectives for investing in the share market. Are you looking to grow your wealth for retirement, save for a down payment on a house, or achieve any other specific financial milestone? Having clear goals will guide your investment decisions.

3. Assess Your Risk Tolerance: Understanding your risk tolerance is crucial. Determine how much risk you are comfortable taking with your investments. Keep in mind that higher returns often come with higher levels of risk. A well-balanced investment strategy aligns risk with your financial goals.

4. Create a Budget: Establish a budget that outlines how much you can invest. Having a dedicated portion of your income for investments is essential while ensuring you can cover your living expenses and have an emergency fund in place.

5. Open a Demat and Trading Account: To invest in the share market in India, you’ll need a Demat (Dematerialization) account to hold your shares in electronic form and a trading account to buy and sell shares. Choose a reputable stockbroker and complete the account opening process.

6. Start with Mutual Funds or ETFs: As a beginner, consider starting with mutual or exchange-traded funds (ETFs). These investment options offer diversification, professional management, and a lower entry barrier than individual stocks.

7. Diversify Your Portfolio: Diversification is a key strategy to mitigate risk. Spread your investments across different asset classes and sectors. This way, the performance of one investment won’t significantly impact your overall portfolio.

8. Start with SIPs (Systematic Investment Plans): Systematic Investment Plans (SIPs) are an excellent way for beginners to invest regularly in mutual funds or ETFs. SIPs allow you to invest a fixed amount at regular intervals, providing the benefits of rupee cost averaging.

9. Stay Informed: Keep updated with the latest financial news, market trends, and company performances. Being informed will help you make well-informed investment decisions.

10. Stay Disciplined and Patient: Investing in the share market is a long-term journey. It’s essential to stay disciplined and patient, especially during market fluctuations. Avoid making impulsive decisions based on short-term market movements.

11. Review and Rebalance: Regularly review your investment portfolio and assess its performance against your financial goals. Adjust as necessary to align your portfolio with your changing needs.

How to Open a Stock Market Account?

Opening a stock market account is a crucial first step for individuals who wish to invest in the share market. Whether you want to trade individual stocks or invest in mutual funds, ETFs, or other securities, follow these steps to open a stock market account:

1. Choose the Type of Account

Decide on the type of stock market account you want to open. The two primary types are:

  • Demat Account (Dematerialization Account): A Demat account electronically holds your shares and securities. It eliminates the need for physical share certificates, making trading and managing investments easier.
  • Trading Account: A trading account is where you place buy and sell orders for stocks, mutual funds, ETFs, and other securities. You need a trading account to execute transactions in the share market.

2. Select a Stockbroker

Choose a reputable stockbroker or brokerage firm. Look for a broker that offers a user-friendly trading platform, provides research and analysis tools, has good customer support, and charges reasonable brokerage fees.

3. Gather the Required Documents

To open a stock market account, you will need the following documents:

  • Proof of Identity (POI): Aadhar card, passport, voter ID, or driver’s license are commonly accepted as POI.
  • Proof of Address (POA): Aadhar card, passport, utility bills, or bank statements are typically used as POA.
  • Passport-sized Photographs: Keep a few passport-sized photographs handy as they are often required for account opening forms.

4. Complete the Account Opening Form

Visit the website of your chosen stockbroker or brokerage firm to fill out the account opening form. Alternatively, you may visit their physical office to complete the paperwork. Please provide accurate details and ensure all documents are attached per their requirements.

5. Verification Process

Submit the filled-out form and the necessary documents to the stockbroker. They will verify your documents and conduct a Know Your Customer (KYC) process to comply with regulatory requirements.

6. Linking Bank Account

Link your bank account to the Demat and trading accounts. This step is essential for seamless fund transfers when buying or selling securities.

7. Receive Login Credentials

Once your account is verified and opened, the stockbroker will provide you with login credentials for the trading platform. You can use these credentials to access your account online.

8. Fund Your Account

Deposit funds into your trading account to start investing. You can transfer money from your linked bank account to your trading account using various online payment methods provided by the broker.

9. Start Trading

You can start trading with your stock market account set up and funded. Use the trading platform to explore investment options, place buy/sell orders, and monitor your investments.

10. Keep Learning

Investing in the share market is an ongoing learning process. Stay informed about market trends, company performance, and economic developments to make informed investment decisions.


The share market in India welcomes a diverse range of individuals, catering to various circumstances and investment preferences. Whether you have a limited budget, are an NRI, a qualified foreign investor, or even a minor, there are accessible options for participation. Moreover, the flexibility of investing without a stockbroker or demat account offers added convenience. Conducting comprehensive research, thoroughly understanding the associated risks, and seeking professional advice is essential to embark on this financial journey. With the right knowledge and a well-thought-out strategy, investing in the share market can be a lucrative long-term endeavour.

At Kanakkupillai, we extend our expertise to assist individuals in navigating various aspects of share market investments. Our team provides expert guidance on compliance requirements, such as opening demat accounts and adhering to regulations for NRIs and foreign investors. Feel free to contact us today for valuable support on your investment ventures.


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