Protect Your Investments: “A Smart Investor’s Precautionary Checklist”

We invest money in the stock market with an intention of making more money out of it. But only a few can actually realise this profit out of their investments. This is due to the necessary precautions not being undertaken by the investors. Hence here is a list of a few things that must be kept in mind before/while investing:

  1. Make sure that the broker you are dealing with is registered with SEBI, i.e. do not deal with an unregistered broker as your funds will then not be in safe hands, and they may be misused. Do not be misled by the false claims that the brokers make.
  2. Avoid being drawn in by rumours or reports about businesses reporting unexpectedly high profits since these may be strategies used to unfairly advantage certain uninformed or uneducated investors’ money. Make proper research before investing in a particular project and get satisfied.
  3. Make sincere attempts to educate yourself about the operation of the stock market. It won’t be difficult to determine which projects are suited for investment if you routinely read the news. Some uninformed investors lose money by funding unfavourable initiatives because they are unfamiliar with equities.
  4. Do not be attracted to stocks based on what an online website promotes, as this may be a way of getting funds quickly and misusing them. Do proper research work and then invest. You may also take advice and guidance from some friends, relatives or anyone who is having a proper knowledge of stock markets and shares.
  5. Take informed decisions only after getting to know about the company you are investing in. Find out the company’s industry, future prospects, prior performance, method of money utilisation, etc. The company’s financial statements, yearly reports, data available with the broker, and financial advisors are sources to learn about the same.

So, the key to safe investing is being well informed and aware about the stock market, and not being lured by rumours and news.

National Stock Exchange has also specified some Do’s and Don’ts for investors

Dos and Don’ts for Retail Investors:

  1. Please deal with SEBI registered intermediaries only.  Ensure that you have complete knowledge of the products, and the risks involve d before investing.
  2. Offering fixed/guaranteed/regular returns or capital protection schemes in stock markets whether written or oral is not allowed. Brokers or any of their representatives cannot enter into any loan agreement to pay interest on the funds/securities offered by you.
  3. Do not fall prey to emails, SMS’s and online videos luring you to trade in stock/ securities / schemes promising high returns/profits.
  4. Ensure to fill all the required details in the ‘KYC’ document by yourself and receive duly signed copy of your ‘KYC’ documents from your broker.
  5. Opt for electronic (e-mail) contract notes/financial statements only if you are computer savvy and have your own e-mail account.
  6. Do not share your login ID, password, OTP, TPIN with any person including employees of the broker under any circumstances.
  7. Ensure that all your trades are executed as per your instructions. Trade verification facility is also available on NSE website which you can use to verify your trades executed.
  8. Ensure you receive the payout of funds and securities within 1 working day of settlement. In case you have chosen running account of funds, ensure your account is settled on first Friday of every month / quarter as opted for.
  9. Dealing in cash is prohibited. Do not place any securities with the broker or associate of the broker or authorized person of the broker. Do not transfer securities as margin/ collateral to the broker and such securities only must be pledged from the client demat account.
  10. Opt for DDPI only for transfer of securities for deliveries/settlement obligations, initiating pledging of securities for margins, and for mutual fund/open offer transactions on Exchange platform. DDPI/PoA are optional and should not be insisted on for opening the account.
  11. Always keep your mobile number and email id updated with your broker. Don’t ignore any SMSs / e-mails with regards to contract notes/trades/funds and securities balances sent by broker/Exchange. Verify the details of the same and report discrepancy, if any, to your broker in writing immediately.
  12. Please verify the bank account details of the broker from the website of broker/Exchange before transferring funds to the broker.
  13. Claims for funds or securities given to the broker under any arrangement/ agreement of indicative return or claims for funds, without transactions on the Exchange will not be accepted by the Exchange in case of default by your broker.

Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement