NEPSE or Nepal Stock exchange is the only stock exchange of Nepal where people can trade the liquidity assets in the form of stock. If you are a newbie to this term, just think of Nepal stock exchange as a system that uses real money to purchase a small percentage of the companies ownership.
Depending on how much you invest, you can either play with the stock market by buying and selling the stocks of different companies when the are allotted, or invest deeply in the company. If you want to invest in Nepal Stock Exchange (NEPSE) you must have two key components. They are:
1. OPENING A Dematerialized Account (DEMAT) ACCOUNT
Dematerialized, often shortened as DEMAT, the account is used specifically to store any of the company shares that you own in dematerialized form. It simply means that any physical copy of shares that you have or used to have is now digitally stored in a more secure and digital form. This DEMAT account is responsible to hold any of your shares of any company.
Opening the DEMAT account is very similar to that of a bank account, the only difference is DEMAT account is responsible for debit and credit all the shares you decide to sell or purchase.
How to open a DEMAT account?
Step 1. Select the Depository Participant (DP)
Opening a DEMAT account at any bank is very simple. just select any Depository Participant according to your interest. Instead of banks, you can also directly open a DEMAT account at a broker's office.
Different banks charge different fees for ASBA so choose accordingly.
Step 2. Fill up the DEMAT account opening form
You might need the following documents:
- Passport-sized photograph
- PAN card (if you work for a living)
- Citizenship or passport for verification
- Children can open a DEMAT account using their parent's documents as proof.
Step 3. Read Rules & Regulations
Reading every rule and legal documents before committing is always a good idea.
Step 4. Access Your DEMAT Account
After verification, the DP will provide you the unique DEMAT account with the client ID. You can enter Mero Share to open your DEMAT account.
Step 5. Maintenance Fee
Different DP charges various fees as a maintenance cost every year.
Step 6. Minimum shares
This means anyone can open a DEMAT account with 0 balance of shares. You don’t need to maintain a minimum balance.
Also, fill up the C-ASBA form along with the DEMAT form to apply for the Initial public offering/ IPO in Nepal online.
2. KNOW THE MARKET
The security board of Nepal or SEBON is the authoritative sole regulator of NEPSE. You can check out the website of SEBON to understand how the market functions. For any kinds of information on shares, you can check out the NEPSE which is also the sole secondary market in Nepal from where you can sell and buy available shares.
Now there are major 3 ways to invest in Nepal Share Market/ NEPSE
1. Invest in IPO/FPOs
Let’s learn about these terms in detail. IPO (Initial public offering) is the public offering in which a company will sell part of its share to the public. It is becoming very competitive and the number of people having a DEMAT account is nearly 40 lakhs, which means the chance of you winning the share is very rare. The winner is often selected through a lucky draw.
While FPO (Follow on Public Offer) is the process in which a company that has already issued a share for the public and listed on an exchange board again issues a new share for the same project to diversify their equity base.
If you are a newcomer in the share market, investing in the FPO and IPO (initial public offering) in Nepal will be the best option. Normally you can apply to start from 10 units of share that will cost you 1000 NRS and within one year you can earn 5-7 thousand from that investment.
Keep in mind, share market always possesses a certain risk so, profit is not always guaranteed in NEPSE.
You can get information from NEPSE and directly apply for the share online on the sites like Mero Share using your DEMAT account.
2. Investing in Mutual funds.
A mutual fund an open-end investment fund managed and organized. The experts in share market which collects money from individual or organization and invest. It on the share market on our behalf.
There is little to no loss in mutual funds but the return is also very low as compared to Initial Public Offering (IPO)s. How this works is, many expert investors will invest our money in various share markets and give us a return every year.
Let’s say you invest 1000 in the mutual fund then the maximum you can earn is double of that in a certain period like 4 years, 6 years, which is known as the maturity period. This is the safest option among the three.
3. Invest in the secondary market
If you are a beginner, we don’t recommend you to invest in the secondary market right away. If you already have knowledge of the share market then you can obviously go for it.
In order to invest in the secondary market, you need t to have a broker account first. Opening a broker account is like that of a DEMAT account. First, choose the broker near you, every broker is given a number like a broker number 26, broker number 36, and so on. Find a trustable broker and fill up the form. Once you fill-up the form the broker will provide you the account id and password which you can use to buy and sell shares directly from an individual or organization.
The secondary market is full of risks so having the in-depth knowledge of the company whose share you are willing to buy is very crucial.