A Complete Beginner’s Guide
Investing in the share market can be a great way to build wealth over time, but for beginners, it can seem confusing and risky. In Nepal, the stock market is growing, and more people are becoming interested in investing. However, to succeed, you need to understand how the market works, how to buy and sell shares, and how to minimize risks.
This article will walk you through everything you need to know about investing in the Nepal Stock Market (NEPSE). Whether you’re a complete beginner or someone looking to improve your knowledge, this guide will help you navigate the world of stock investing with confidence.
1. Understanding the Share Market in Nepal
The share market, also known as the stock market, is a place where people buy and sell shares (ownership in a company). In Nepal, the main stock exchange is the Nepal Stock Exchange (NEPSE), which operates under the regulation of the Securities Board of Nepal (SEBON).
When you invest in shares, you become a part-owner of a company. If the company grows and earns profits, the value of your shares increases, allowing you to sell them at a higher price. Some companies also pay dividends, which is a portion of their profits distributed to shareholders.
2. Key Players in Nepal’s Share Market
Before diving into investments, it’s important to understand the main players in Nepal’s stock market:
a) Nepal Stock Exchange (NEPSE)
NEPSE is the only stock exchange in Nepal where shares of publicly listed companies are bought and sold.
b) Securities Board of Nepal (SEBON)
SEBON regulates and oversees stock market activities to ensure fair trading practices.
c) Brokers
Stockbrokers are licensed firms that help investors buy and sell shares. In Nepal, you cannot directly buy shares from NEPSE; you must go through an authorized broker.
d) Listed Companies
These are companies whose shares are available for public trading on NEPSE.
e) Investors
People like you who buy and sell shares to make profits.
3. How to Start Investing in Nepal’s Share Market
Step 1: Open a Demat Account
A Demat (Dematerialized) account is essential for holding shares in electronic form. You can open a Demat account with a Depository Participant (DP) such as banks, brokerage firms, or merchant banks.
Required Documents for a Demat Account:
- Copy of Citizenship Certificate
- Passport-size Photo
- Bank Account Details
- KYC (Know Your Customer) Form
Step 2: Get a CRN Number
A CRN (C-ASBA Registration Number) is required to apply for shares online. You can get it from the bank where you have your account.
Step 3: Open a Mero Share Account
Mero Share is an online platform provided by CDSC (Central Depository System and Clearing Limited) that allows you to apply for Initial Public Offerings (IPOs), check your portfolio, and transfer shares.
You can register for Mero Share through the same DP where you opened your Demat account.
Step 4: Choose a Stockbroker and Open a Trading Account
To buy and sell shares on NEPSE, you need to register with an authorized broker. There are 50+ licensed brokers in Nepal. Once registered, you’ll get a trading account to start investing.
Step 5: Start Investing
Now that you have a Demat account, CRN, Mero Share, and a broker account, you’re ready to invest. You can either:
- Apply for IPOs (Initial Public Offerings)
- Buy and sell secondary market shares through your broker
4. Ways to Invest in Nepal’s Share Market
a) Investing in IPOs
IPO stands for Initial Public Offering, where a company offers its shares to the public for the first time. Investing in IPOs is considered low risk and highly profitable in Nepal because shares usually list at a higher price when they start trading.
You can apply for IPOs online through Mero Share’s ASBA system.
b) Investing in the Secondary Market
Once shares are listed on NEPSE, they can be traded in the secondary market. Here, prices fluctuate based on demand and supply, company performance, and market trends. You need to analyze market trends before buying shares.
c) Mutual Funds
If you don’t want to pick stocks yourself, you can invest in mutual funds. These funds are managed by professionals and invest in multiple stocks, reducing risk.
d) Long-term vs. Short-term Investing
- Long-term investing: Buying stocks and holding them for years to benefit from growth and dividends.
- Short-term investing: Buying and selling stocks within a short period to take advantage of price fluctuations.
5. Things to Consider Before Investing
a) Risk Management
The stock market is risky. Prices go up and down, so never invest money you can’t afford to lose.
b) Company Analysis
Before buying stocks, research the company’s financial health, earnings, and future potential.
c) Market Trends
Stay updated with NEPSE trends, economic news, and SEBON updates.
d) Diversification
Don’t put all your money into one company. Spread your investment across different sectors to reduce risk.
6. How to Buy and Sell Shares in Nepal
Buying Shares
- Log in to your broker’s trading platform.
- Search for the stock you want to buy.
- Place a buy order at your desired price.
- If a seller agrees to your price, the trade is executed.
Selling Shares
- Log in to your broker’s platform.
- Select the stock you want to sell.
- Place a sell order.
- If a buyer matches your price, your shares are sold.
The money from your sale will be deposited into your bank account within a few days.
7. Tax and Regulations for Investors in Nepal
- Capital Gains Tax:
- 5% tax for individual investors if sold after one year.
- 7.5% tax if sold within one year.
- Dividend Tax: 5% TDS (Tax Deducted at Source) on dividends.
- Regulations: All stock transactions must follow SEBON and NEPSE guidelines.
8. Common Mistakes to Avoid in the Share Market
- Investing without research
- Following stock market rumors
- Buying stocks at a high price due to hype
- Selling shares in panic during market crashes
- Not diversifying investments
Conclusion: Is Investing in Nepal’s Share Market Right for You?
The share market in Nepal offers great opportunities for wealth creation, but success requires patience, research, and strategy. If you’re a beginner, start with IPOs, learn about the market, and gradually invest in the secondary market.
By following this guide, you can confidently step into Nepal’s stock market and make informed investment decisions. Remember, investing is a journey—keep learning and growing!