How Much Money Do I Need to Start Share Trading?

You have decided to get into the arena of share trading but your mind is full of queries and doubts. Don’t worry, you are not alone! Every one of us has pondered upon things like the minimum capital needed to kick start our share trading journey before getting on to the bandwagon.

If you need a quick answer to the question – there’s no minimum limit to getting started in share trading. But, if you want to understand the topic in more detail, keep reading!

How Much Money is Needed to Enter the Share Market?

Before you start trading in the share market you will need a Demat and a Trading account, linked to your savings bank account. You cannot embark on a journey to share trading without a Demat account to hold your shares and a Trading account to buy and sell shares. So, the first thing you need to consider about money is the charges applicable for the Demat and Trading account.

Though there are banks and depository participants (DP) who charge a nominal fee to open Demat and Trading accounts, there is a long list of discount brokers who are offering the services for free. In today’s digital world creating a Demat and Trading account has become as easy and fast as creating your profile on social media platforms like Facebook or Instagram.

So, you do not need to spend a single penny on getting a Demat and Trading account, provided you choose a DP that offers the service for free.

[Note: These ‘free’ Demat and Trading accounts are legal and fully functional and there’s no hidden loss in opting for such services.]

How Much Money is Needed to Start Share Trading?

Once you have got your Demat and Trading account, it’s time to think about share trading. As mentioned earlier, there’s no minimum amount of money you need to start share trading. You are allowed to buy a single share in the Indian stock market. So, technically you just need enough money to buy one share of your choice. And, let us tell you that the stock markets have listed shares that are priced even below Rs. 5 only! We cannot give you a specific names of stocks as share prices keep on changing daily.

In a nutshell, you can literally start share trading with whatever spare money you have in your kitty.

[Note: Once you have a Demat and Trading account, you will need to pay a nominal maintenance charge every year. It can be charged yearly or quarterly or at any other frequency decided by your brokerage agency. A lot of DPs start charging the maintenance only after one year. You should read all relevant information before selecting a stockbroker for yourself.]

With How Much Amount Should You Start Share Trading?

Now, this is the real question you need to ponder upon. Technically, you can buy one share of Rs. 5 and say that you have started share trading. But, that’s practically useless! Isn’t it? So, we need to figure out the ideal amount with which you can start your journey as a share trader. Experts say that the amount you put in the share market must be decided by two factors –

• The surplus amount you have
• The risk appetite of the trader

This simply means that you should only put the amount that is surplus with you. And, before putting that amount in the share market you should also know that share trading has its own risk and you may lose your capital. Different experts have different opinions on the method of deciding the capital for share trading. Here we are listing a few methods. Choose the one that suits you best.

1. Learning with baby steps

If you are just starting out, you might like to learn some nitty-gritty of share trading before diving deep. In such a scenario you should start with tiny baby steps and increase your capital as you become more confident about your trading strategies. Remember, at this stage, you want to learn the art of stock selection, market-entry, and exit strategy rather than generating profit. You can start with a capital of 1,000 or 5,000 or any other amount that feels small to you but also gives you the flexibility to buy a few shares.

2. Investing one-third of the desired amount

The next very popular strategy is called the x/3 strategy where x stands for the amount you are willing to put in the share market. If you are reading this article with an already decided amount in your mind, this strategy is best for you. Suppose you have kept aside Rs.1,00,000 intending to put it into the share market, you should start trading with just one-third of that amount. If you feel you did well with your first installment you can then bring the next 1/3^rd and continue trading.

3. The 100 minus your age strategy

This strategy is for those who already have a decent amount in surplus. This strategy is formed on the belief that the older the person gets the lesser risk they should take. Suppose you are 30 years of age, this strategy allows you to put 70% (100-30 = 70) of the surplus saving in the share market for trading and investment.

Final Thoughts

Share trading is not gambling and it should not be taken as such. It is a science and art which you need to learn. So, it’s always advisable to start small, learn the game, and then gradually increase the capital as you build confidence in your trading strategy. Trading has a learning curve therefore it is said that you should start learning and practicing it as early as possible.