Equity Investment: Suitability & Available options
In the
last equity related article we have discussed about advantages and
disadvantages. Today, we will discuss for whom is equity investment is suitable
and how can we invest in equity. First, lets talk about some point about those
investors who qualify for equity investment.
- Equity investment is for those investors who have risk taking capacity. In the near term, the valuation of their investment may be go down significantly. It may not be suited for those investors who want to safety of their capital any time. Before any equity investment investor should gauge their risk appetite.
- It is suitable for those investors who want earn higher return on the investments after adjusting inflation. As per available data, equity has beaten each asset class in the long run. If you want to beat inflation in the long run, equity investment for you would prove the best bet.
- Equity investments need patience and discipline. You must have patience to achieve your long term goal. You can easily achieve your long term goal like retirement plan or any goal more than ten year by investing in equity every month on regular basis. Be investing every month you get benefit of rupee cost averaging also.
- As per current taxation, the long term capital gain in nil on equity investment and dividend is also tax free. It is good option for those who want prudent tax planning.
How can we invest in equity?
After
discussing suitability of equity now we are going to discuss how we can invest
in equity. There are 2 ways to invest in equity.
Direct Investment
For direct
investment, you need to open a demat account with any registered broker and
need a bank account for transaction. You can purchase a listed company’s share
by calling your broker. It is so easy. Many companies come with IPO (Initial
Public Offer) to issue share directly to the retail investors. Any investor can
participate in the IPO.
It is suitable
for those investors who have vast knowledge of the companies, economy and
business cycle. It required a lot of time, knowledge and skill.
Indirect Investment
For those
investors who have not much time to study about companies and financial market,
there are indirect investment options available. Mutual fund is the best option
available to reap the benefit of equity investment. Any investor can invest a
small amount like Rs 500 every month on fix date and can make the good corpus
in the long run. The mutual fund investment provide the advantage of
professional management, qualified research team, transparency in investment
for any type of investors with even small sum of investment.
There are
other indirect equity investment options also available like PMS, ULIP etc. As
per my view, mutual fund is the best and low cost option available for
everyone.
If you want more information
regarding equity investment or you have any other query related investment feel
free to ask us.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
