Quick tips for first time Equity Investors

 

Before investing in direct equities, it is critical to evaluate your risk appetite and return expectations as the stock market is often driven by greed, fear and irrational behavior which may dent the best laid investment plans.

THE PANDEMIC and its economic effects have brought new investors to the equity market. In May, SEBI reported that 4.9 million new demat accounts had been opened during FY 20, a 22.5% increase year-on-year. A demat account is required for direct investment in stocks. The trend indicates that investors are now more confident about direct equity investing. There are many reasons for this spike. Largely, the interest is driven by a steep fall in the market earlier this year which provided deeply discounted investment options for first time customers. If you are also planning to jump on to the bandwagon, know these five important things about investing in equities:

Cost of demat account

            For investing directly into equities, you are first required to open a trading and demat account through a stockbroker. You would need an image of your PAN car and a cancelled cheque, and Aadhaar details. Account opening may cost you Rs. 200-Rs.500, which often includes demat account charges for the firs year. Some brokers offer free account opening along with zero demat charges for the first year. Currently, flat brokerage is popular among investors. In it, the broker levies a fixed charges per scrip regardless of the number of scrips in intraday trade while charging zero or minimal brokerage for delivery based transitions. For example, if you bought 200 stocks in company 'X' and squared them off the same day, the broker will charge a fixed amount, say Rs. 20 (excluding taxes and charges levied by exchange). If you didn't square off the shares and carried them to the next day, the broker might charge you a minimal brokerage, which is nearly zero when you sell that scrip. However, you have to pay the exchange charges and taxes as applicable.

            Brokerage may also be charged as a fixed percentage of your trade. Traditional or old broking companies use this system in which you pay a fixed % of your intraday or delivery trade as brokerage. For example, a broker may charge 0.02% - 0.05% for intraday trades and 0.2%-0.5% for delivery. If you make large trades, percent brokerage will prove costly.

            Before you open a trading and demat account with any broker, check the account opening charges, annual fixed charges, demat charges, brokerage structure, quality of trading platform the broker offers, quality of back office support, background of the broker and ease of account opening while fully compliant with regulations.

Do your Research

                If your broker has a good research wing, it can help you identify that can perform well in the short or long term. Access to first hand reports can give you an edge over investors who invest merely on instinct. Despite all the research reports and ideas you may get from your broker and other sources, do your own stock research regularly. With time, you'll start picking up information quickly, read the company results accurately, and sense market movements.

Time Horizon

                Long term investment are often safer than short term trades. Short term trades are usually ones where you square off position within a year. If you carry them for more then one year, they are called long term. If you have enough time to track your shares, have a high risk appetite, and know how to research your options, you may start short term trading. Apply strict stop losses and avoid trading beyond your risk appetite. Long term equity investing offers a great chance to earn an attractive return and keep you safe from day to day volatility.

Assess your Risk

                Before you invest in direct equities, its crucial to evaluate your risk appetite and return expectations because the stock market is often driven by irrational behavior, fear and greed which may dent the best laid investment plans. Information-backed decision are key. Avoid pouring fresh money into stocks that are not going to recover. Conversely, if you've achieved your targets, book your profits and exit a stock.

Diversify your portfolio

                Never put all your eggs in one basket. Portfolio diversification is required to optimize risk and rewards. Diversify your investment across different sectors. Avoid following tips from unregistered stock advisors. Be aware of your financial limits. Don't gamble with you life savings because the risks are very high.

 

Eagle Mentality

Don't be a Parrot in life. A Parrot talk to much but can't fly high but an Eagle is silent and has the will power to touch the sky. 

1. Eagles Fly Alone at High Altitude:

Eagle don't fly with Sparrow, ravens and other small birds. Stay away from narrow minded people, those that brings you down. Eagles flies with eagle. There is a saying that goes like this, People you hangout around  will eventually determined the person you become. Keep good company. 

2. Eagles have vision:

They have the ability to focus on  something as far away. No matter what the obstacles, the eagle will not move his focus from the prey until he grabs it. Have a vision and remain focused in your life, no matter what the obstacles and challenges you may face, DON'T GIVE UP & you will succeed. 

3. Eagles are Fearless: 

An Eagle will never surrender to the size or strength of its prey. It will always give a fight to win its prey or regain its territory. No matter what the size or big your problems are. Don't give up instead face it. Successful people are fearless. They face problems head on. 

4. Eagles are Tenacious:

Eagles love storm. When clouds gather, the eagle get excited. The eagles use the storm wind to life itself higher. Once it finds the wind of the storm, the eagles use the raging storm to lift itself above the clouds. This give the eagle an opportunity to glide and rest its wings in the meantime all the other birds hide in the branches and leaves of the tree. Achievers are not afraid of challenges rather they relish them & use them profitability. 

5. Eagle never eat dead things:

Eagles never eats dead meat. In other words, an eagle does not scavenge. It only eats the meat from the prey it kills itself. Don't rely on your past success, keep looking for new frontiers to conquer, leave you past where it belongs in the past. 

6. Eagles prepare for training:

They remove the feather and the soft grass in the nest so that the young ones get uncomfortable in preparation for flying and eventually they fly when it becomes to unbearable to stay in the nest. Leave your comfort zone. There is no growth there. 

7. Eagles posses vitality:

When the eagle grows old his feather becomes weak and cannot take him as fast and as high as it should. This makes him weak and could make him die so he retires to a place far away in the mountains and while there, he plucks out the weak feathers on his body breaks its beaks and his claws against the rock until it is completely bare. A very bloody and painful process then he stays in his hiding place until he has grown new feathers, new beaks and claws & then comes out flying higher than ever before. We occasionally need to shed off old habits. No matter how difficult, things that burden us or add no value to our lives should be let go of.