Equity

Introduction:

Investment in shares of companies is investing in equities. Stocks can be bought/sold from the exchanges (secondary market) or via IPOs – Initial Public Offerings (primary market). Stocks are the best long-term investment options wherein the market volatility and the resultant risk of losses, if given enough time, is mitigated by the general upward momentum of the economy. There are two streams of revenue generation from this form of investment.

Criterias:

The main criterias to be considered before investing in the Equity market are:

1. Liquidity,

2. Safety,

3. Returns,

4. Involvement and

5. Amount of investment.

Liquidity:

The major advantage of Indian equity market is the nature of the liquidity of the equities which are floated in the market. Any investor can buy shares of any company and sell it at the end of the day. But the returns are not assured. This process is called Short Selling. The settlement process of equity is T+2, which means traded day plus two days. If u sell the stocks today the actual money u get will be day after tomorrow. But you will be debited with the amount as soon as the sale is made in the Demat account you maintain.

There is a regulation regarding the short selling issue, short selling means, selling the shares in one's name without being taking the possession of the shares. For those who are day traders, they buy the shares in the morning and with taking the possession they will sell it in the evening. so the liquidity is more in the case of short selling.

Safety:

The investment is Indian Equity market is more volatile in the recent past. All this is because of the quitting of the FIIs. In order to be safer without loosing so much of you money, the wise idea is to hold the stocks which will bring good returns once the crises settles and also the amount invested will be safer.

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Returns:

The returns on investments from the Indian equity market is not so encouraging at this time. But with the good inflows of FII the equity market will yield good returns in all terms. At the time of good market conditions, the returns form the equity investments will be good for you. but at the time of crisis like at present, your returns will be ruined.

Involvement:

The involvement needed before and after investing in the Equities should be immense. No one can judge the future of Indian equity market. It is totally dependent on the foreign market. So the equity market investment involves immense involvement if u want to gain profit in short term. If u like to invest for long term, the only involvement u need is to purchase the stocks which will has a good future prospects.

Amount of investment:

You can enter into the trading with a minimum amount. There is no minimum amount to invest in equity market. If you have more money you can purchase more shares and vice-versa.

There is some thing called as trading leverage given by the DP where we maintain our demat account. Leverage means the excess amount provided by our DP to us for trading in the stock market. If we have 1000 rupees credit balance in our account, and if the DP gives us 4 times or 5 times leverage, then we can trade for 4000 or 5000 rupees respectively. It is good if we gain out of it. And if we incur any loss, say about 2500 rupees loss in the 5 times leverage, then we will be having a debit balance of 1500 rupees. which not easy for us to repay.