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-
The answer to your question- How to start an equity investment starts with this section.
If you have a demat account 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 chances 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.
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.
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.
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 fulfill these goals, each trader and investor must define a technique that suits his requirements.
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.
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, 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.