Beginner guide · 6-minute read
Stocks, explained simply
Buying a share means owning a small part of a company. You buy and sell shares on the stock exchange through a broker. Over long periods shares have grown faster than most options, but a single company can fall a long way, and some never recover.
Checked on 15 Oct 2026 against SEBI and income-tax rules for FY 2026-27, and AMFI's notes on the overseas investment limit.
In one minute
- How you buy
- Through a demat and trading account with a SEBI-registered broker.
- What it earns
- Nothing fixed. For a spread of large companies this site plans on 8–15% a year; mid-size, 10–18%.
- The risk
- One company can lose most of its value. Owning many lowers the risk.
- Tax
- 12.5% on gains above ₹1.25 lakh a year after 12 months; 20% within 12 months. Dividends at your slab rate.
How it works, with real numbers
Say you put ₹10,000 a month into shares of large companies for 15 years. At 12% a year you'd have about ₹47,59,314, and ₹43,90,349 after tax.
At 8% it would be about ₹32.06 L after tax; at 15%, ₹56.12 L. These ranges assume a spread of many companies; with a few, the result could be far outside them.
Pros and cons
Good things
- You own the business. You share in its profits through dividends and a rising share price.
- No fund fee. You pay only brokerage and taxes on each trade.
- Equity tax rules. The first ₹1.25 lakh of long-term gains each year is tax-free.
- Sell any trading day. Large companies' shares are easy to buy and sell.
Things to watch
- Picking is hard. Many professional fund managers fail to beat the index over long periods.
- One company can sink. Too much in one share can wipe out years of gains.
- It takes time. You need to follow the companies you own.
- Emotions get in the way. Selling in a crash or chasing tips costs money.
Is it right for you?
Mistakes to avoid
- Too much in one company. Spread across many companies and industries.
- Trading too often. Each trade costs money, and gains within 12 months are taxed at 20%.
- Acting on tips. Messages promising quick gains are a common way to lose money.
How to start
- Open a demat and trading account with a SEBI-registered broker, with your PAN and Aadhaar for KYC.
- Start with large, well-known companies, or an index fund while you learn.
- Spread your money across companies and industries.
- Plan to hold for years, and keep an eye on the companies rather than the daily price.
Words you'll see
- Share
- A small part-ownership of a company.
- Demat account
- An account that holds your shares electronically.
- Broker
- The firm that buys and sells shares for you on the exchange.
- Dividend
- A share of the company's profit paid out to shareholders.
- Large-cap, mid-cap
- India's biggest 100 companies by value, and the next 150.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.