Equity is an asset class. Just the way you open a fixed deposit with the bank or visit a jeweller to buy gold, you trade in equities in the stock market. Here are the equity trading basics if you are starting your journey as an equity investor.

What is Equity Trading? 

Equities are company shares you can buy or sell on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). This is called equity trading. 

Why Should You do Equity Trading? 

The main aim of any equity trader is to buy at lesser prices and sell at a higher price to earn profits. Some benefits are listed here:

• Better Returns: The equity market investment usually gives higher returns than other markets in the long term and during inflation. Hence, they are popular among investors looking for growth funds.

• Diversification: Equities are an intelligent way to diversify your investment portfolio and maximize risk-return tradeoff.

• Dividends: Some companies also distribute their profits in the form of dividend income to their shareholders. This is an additional, unexpected income source for equity traders.

• Bonus Shares: Some companies even offer bonus (free) shares instead of dividends.

• Right Shares: Companies issue rights shares for capital expansion or other business needs. You can also get the priority privilege of buying right shares at a lower price before they are opened for the public at a higher price. 

• High Liquidity: You also get high liquidity in equity as compared to other financial instruments in the market. A majority of equity stocks do not have a lock-in period.

How to Do Equity Trading? 

You need to open a Demat account for equity trading. You can then start buying and selling stocks online in the dematerialized form or electronic format. Please note that you have to contact a registered stockbroker to open a Demat account. You also need an online broker platform to view all the stocks and buy or sell as per your requirement. The claim and settlement cycle is usually T+2 days and runs like a well-oiled machine.

What Things do You Need to Bear in Mind While Trading in Equity?

While the Securities and Exchange Board of India (SEBI) governs equity trading and stock markets, they are vulnerable to market volatility. Hence, you must have sound knowledge of the stock markets. It would also help stay updated with the latest industry news and other factors that influence the stocks. Or else, you might incur losses. 

It is also a good idea to pay attention to market sentiments and avoid following the herd mentality. Do your research and talk to stock market experts before you take any decision to buy or sell.

As a beginner, it is always recommended to connect with an equity investment advisory firm. An advisory firm can understand your investment objectives, risk appetite and budget, and provide the necessary advice. It can guide on what and when to buy or sell. It can professionally manage your equity portfolio.

Lastly, remember that you should always do equity trading with a long-term horizon to reap the maximum benefits.

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