Equity Investment

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If you are investing in the stock market or might have a keen interest in the equity segment, then a question like How to start equity investment must be on your list.

Well, the answer to the same is not that simple because you will be required to follow certain important steps while starting your journey in equity investments. 

But, before moving forward let us understand the concept of equity

Equity is one of the trading and investment segments just like commodity, derivatives, currency, etc. however, each of them is equally different from one another. 

Equity is a broader term that includes shares, stocks, and other securities of a company. Thus, in simpler terms equity represents an ownership interest in a company by buying a certain number of their stocks, shares, etc.

Hence, when a trader or an investor owns a share of a company, he becomes an owner of that company too. 

Let’s understand with the help of an example:

ABC company has a total of 1000 shares and an investor named Sharan was really interested in buying them due to the overall performance of the company. Hence, he bought 100 shares of the same.

Now, Sharan successfully got 1% ownership in the company. 

Do you know that with a simple formula, you can calculate the Equity of a company? The formula is as below-

Equity = Assets – Liabilities

So, if you deduct all the liabilities (expenses) from the total value of assets including profits and earnings, you get the entire value of equity a company holds. 

Equity stocks can be categorized in different ways and some of these ways are listed as below-

Now, let us quickly answer your question- How to start equity investment, or how does equity investment work? 

Equity Investment Types

Before we get into the technicalities, it is good to know about the Equity Investment Types that are available in the share market to invest in.

This investment class has different types and segregations with each of them having its own risk level and return expectations. It becomes easier for different kinds of investors to pick and choose as per their objectives.

Here are the types:

So, which one do you plan to pick for your equity investment?

What is Equity Investment?

It’s time that we must understand and know how to start equity investment and also familiarise ourselves with the grounds on which equity investment works. 

Also Read: How does Stock Market work in India?

So, to make the process effective, we have shared a list of few crucial steps that can boost your equity investments and these steps are listed below:

  • Choose the right stockbroker
  • Start with small chunks
  • Choose the right investment sector
  • Follow In-depth study of the stock and company
  • Learn different strategies and define one
  • Familiarize yourself with a different types of order placements

Let us understand each of these steps one-by-one in a detailed way. 

Start Equity Investment

You know what?

Enough of talk, let’s now jump into some practical aspects of this form of investment. Equity investment, if done strategically, can lead to decent profits on your capital amount.

Here are 6 steps that you can follow sequentially and actually figure out what we mean here:

1. Choose the Right Stockbroker

The answer to your question- How to start an equity investment starts with this section.

If you have a share market account opened with a reliable stockbroker who is listed with SEBI or Securities and Exchange Board of India then you can safely and securely take the first steps towards equity investments. 

Don’t forget to find and select the broker which is listed with exchanges that offer equity shares or stocks such as the Bombay Stock Exchange (BSE) and NSE (National Stock Exchange). 

Also, you can invest in Unlisted Stocks. Now you must be thinking what are these? Not to worry, in simple terms, unlisted stocks are the stocks of the companies that are not listed in NSE and BSE.

But it is not a worry, because most of the companies are startups that are in their initial growth and if you find any startup that is doing well in the market and has the chance to beat others, then you can invest in them as the price of such shares are less than the listed stocks and has high profits as well if invested with proper research and analysis.

Thus, know How to Buy Unlisted Stocks? if you are keen and sure about the stock of a company.

But, prior to that make sure you know Listed vs Unlisted Stocks.

So, keep this first step accurate since your equity investments will be entirely dependent on it.

2. Diversify Portfolio

The first and foremost thumb rule of investment is never to invest your entire money in the stock market. Rather, invest with little chunks so that the loss of appetite is manageable. 

For example, if you have around Rs. 50,000 in your account then instead of buying equity shares of the complete amount try to diversify your portfolio by distributing this amount in various segments like IPO (Initial Public Offering), mutual funds, Portfolio Management Services (PMS), commodity, currency, futures trading or even options trading

As a beginner investor, begin follow the right tips and learn how to diversify your investment portfolio in India to maximize your return on investment.

3. Choose the Right Stock to Invest

Equity is a broader segment that includes diverse investment sectors in the stock market such as healthcare, IT, industrials, energy, power, metal, utilities, financials, etc. 

Hence, understanding and choosing the right one is highly essential as each sector experiences different volatility, risk appetite, returns, liquidity, profits, etc. are also varied. 

Also, you can choose to invest in Blue Chip Companies which carries less risk and high returns on your investment to have stress free trading.

For example, health care or pharmaceuticals is more volatile, thus the risks associated while trading with these companies or shares will be higher but on the same side, the returns will be higher too.

Some of the well-renowned and profitable companies listed in NSE are given as below:

  • Financials include several financial banks, real estate firms, insurance companies, investment funds, etc. such as Axis Bank, SBI Bank, and many more!
  • The energy sector includes BHEL (Bharat Heavy Electricals Limited), Tata Power, IOCL (Indian Oil Corporation Limited), BPCL (Bharat Petroleum Corporation Limited), and a lot more!
  • IPO is also known as Initial Public Offering including SBI cards, Chemcon Special, Burger King, etc. 
  • Industrials consists of multiple companies that manufacture and distribute capital goods like Tata Steel, SAIL (Steel Authority of India), Jindal Steel, and much more! 
  • Healthcare includes pharmaceutical companies like Sun Pharma, Aurobindo Pharma, Lupin, Cipla, and many more! 

4. Technical and Fundamental Analysis of Stocks

Once you have chosen the right sector in which you wish to make equity investments, you can proceed with the next step of deeply analyzing the stock and the company. 

Here, you will be essentially required to perform technical and fundamental analysis of the stock and company respectively. 

For example, if you have chosen the pharmaceutical or health care sector and further to define the company in which you will make equity investments, it is essential to perform a fundamental analysis.

It includes going through the company’s returns, balance sheets, earnings, profit and loss account statement, growth rate, employment, GDP, production, etc. 

To analyze any stock or share, it is vital to conduct a quick technical analysis that will cover forecasting of the direction of prices by studying their past movement, especially in their volume and price. 

5. Investment Strategy

We believe that each and every trading and investment journey has a specific goal. So to fulfil these goals,  each trader and investor must define a technique that suits his requirements for goal-based investing

These techniques must be designed efficiently to avoid and tackle possible losses that can happen while trading in the stock market. 

This is the phase that clearly and rightly answers how to start equity investment in the stock market.

No doubt, you must be aware that there are several strategies for different trading types, such as Intraday trading, Algo Trading, Swing Trading, Delivery Trading, Momentum Trading, Scalping, etc. 

If you trade in currency, you know that currency is a highly volatile segment in the share market then it is good to know How to trade in Forex? and reap its benefits.

Also if you are a keen trader of Intraday and Options then here is good news for you.

To practically understand these types, you can also opt for Virtual Trading apps where you can learn them without any money loss. Sounds great, right?

6.  Trading Order Types

The final and last step of your question- How to start equity investment is to familiarise yourself with several kinds of order placements such as Stop Loss (SL), Limit, Market, Stop Loss Market (SL-M), Cover Order (CO), Bracket Order (BO), CNC and MIS, IOC (Immediate or cancel), etc. 

These order placements help an equity investor to avoid and overcome any trading risks and losses. Hence, these order types act as a risk-management strategy to safeguard your shares, stocks, or any other securities. 

So, this was the end of our main topic today- How to start equity investment and we have shared 6 crucial steps to have a fruitful equity investments journey. 

By following these steps, you can unleash a wider scope of profit and can earn attractive profits! However, you must also remember that each trading requires practice and is quite different from each. 

With practice and understanding of the stock market, you can surely proceed with buying stocks, shares, and other securities in the equity segment.

Now, it’s time that we must close the article with the last words in a summarising way.

Closing Lines 

In a nutshell, we can precisely conclude the question- How to start equity investment and the answer to the same is simple and straightforward.

Just with a few important measures or steps, you can succeed in equity investments.

But, before moving ahead with the equity segment, make sure that you have an understanding of the rules of stock market and its different asset classes. 

In simpler terms, Equity refers to the shares, stocks, or other securities owned by a trader or an investor of a company and simultaneously, he has also obtained ownership in the respective firm. 

The formula for calculating equity is deducting all liabilities from the total value of assets. Here, assets refer to the total income and the profit company generates in a year.

Hence, assets – liabilities give you the correct amount of equity a company holds.

By following these steps carefully and strategically, one can earn excellent profits in the stock market. 

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