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Direct Equity - Everything You Need To Know

Published On Mar 08, 2022 10:00 AM By InsuranceDekho

Referring to the shares in a company’s ownership, equity is the total amount of money that you will receive when the company pays off all its debt and liquidates its assets. When you, as an investor, invest in a company’s equity, you become its partial owner. Being an equity shareholder, you have the right to participate in the company’s profits, whose share(s) your own.

Note that when you invest in a company’s equity, you can earn profits when prices appreciate. For matters related to the board of directors, you enjoy voting rights.

How Can You Invest in Equities?

You can invest in this asset class via the below ways:

Direct Investments Through Stocks

If you wish to invest in equities directly through stocks, you need to open a trading account and a demat account. While the demat account holds your shares in an electronic format, the trading account is the place to buy and sell orders with your stockbroker. Some advantages you get when you invest through stocks: 

  • High Return Potential

This is perhaps the biggest benefit that you can derive through direct equity investment via stocks. If you can make the right pick, you can make substantial gains. Having said that, success entirely depends on your stock picking skills and the ability to sell it at the most opportune time.

  • Huge Investment Universe

When you opt for direct equity investment, you get to choose from a large universe of stocks. You can pick the one which you feel has the potential to deliver maximum growth and augment your wealth in the long run. Depending on your risk tolerance, invest in a stock of a large cap, mid-cap, or small cap firm.

Things to Keep in Mind While Investing Directly Through Stocks

In direct equity investing, you need to be more careful about risk management. Hence, you must:

  • Do thorough research on the different parameters before buying a stock.

  • Keep yourself abreast with the latest market developments.

  • Give yourself enough time to learn about stock market jargon and other fine details.

  • Understand balance sheets of companies before investing and know their order books.

If you can spare time to do so and understand these things in-depth, you can go ahead and invest in equities directly through stocks. If not, the second option can be more prudent.

Bottom Line

If you have an aggressive outlook and a high-risk tolerance, equities are the go-to asset class. They can help you build adequate funds for different life goals, especially long-term ones, and ensure you address them with ease.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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