Shares or equities are an extremely popular asset class for investors around the world. Equity markets have historically outperformed every other type of investment and are generally held as an attractive way of creating long term wealth by investing in shares of good companies. Share prices of a company tend to increase following the consistent revenue and profit generation and investors who had bought these shares earlier at a lower value tend to benefit as a result. In addition to this capital gain, well performing companies also tend to give dividends to the shareholders out of the profit they make.

Since equities don’t pay a fixed interest rate, they don’t offer guaranteed income. Hence, with equities comes the risk factor. There are various risks involved in equity investment that affects your returns such as changes in economic environment namely, changes in interest rates, inflation, market risks to name a few. While investment in equities is not risk-free because of various risk factors, being regulated by Securities and Exchange Board of India (SEBI) you can be sure that there is no counterparty risk.

ABC Limited is a privately owned company that is currently worth Rs10,000,000. The owners want to raise some money so that they can expand the business overseas. To do this, they sell a portion of the business by issuing stock at Rs2 per share. This means ABC becomes publically listed. You decide it looks like shrewd investment so you buy Rs10,000 worth of stock. At Rs2 per share that gives you 5000 shares, or a 0.1% stake in the company.Your investment turns out to be a good one. By the time ABC releases its first annual earnings report, its share price has risen to Rs3 and your investment has grown to a value of Rs15,000. You can now either sell your shares, or hold onto them in the hope of future profits.However, share prices can go down as well as up and if ABC plc had gone down in value you could have lost money. For that reason, it is incredibly important to research both the company you are thinking of investing in and their wider industry before you buy any shares.

Investors can buy or sell shares through an agent, commonly referred to as “stock broker”. Investors can simply open an account with the broker and buy/sell shares in a publicly listed company which is listed on any of the major stock exchanges in the country. Opening an account with a broker is a straightforward process and it can be done quickly by submitting documents like ID proof, residence proof and bank details etc. Once an account is opened, an investor can transfer funds according to his convenience and start transacting in shares and other securities like commodities, equity derivatives etc.