Everything you need to Know about Equity Investments

The main objective of every investor is to earn returns on their investments. These returns are either fixed or based on market factors. The returns you expect from the equity investments are market-linked. Unlike fixed return investments that are mainly preferred by beginners, equity investment carries a high level of risk. At the same time, it offers a high rate of returns to investors. In the equity investments, traders buy stocks from the companies listed on stock exchanges. They could also buy shares from small companies. Let’s take a look at the common types of equity investments:

  •     Shares: The shares make the investor the partial owner of a particular company. Each investor that owns shares of a company will be considered as the shareholder. Investors can buy shares at a low price and sell them at a higher value to generate profits.
  •     Futures and Options: It enables the trader to purchase and sell securities, but postpone the delivery of the assets.
  •     Equity Mutual Funds Investment: A perfect option for investors who do not have a lot of knowledge and skills concerning the stock market industry.
  •     Arbitrage Schemes: An investor can buy and sell stocks on multiple exchanges to leverage the differences in the stock price. It guarantees profit to the investor.
  •     Alternative Investment Funds

There is no denying that equity and non-equity investments are associated with high risks. The returns are uncertain and it could lead to financial loss if your assumptions turn out to be inaccurate.

Liquidity Risk

Liquidity risk gets the trader to sell the stocks they own at a considerably lower price than the actual market price. These risks are common in the stocks that are sold in low volumes. Investors end up selling the stocks at a low price in order to deal with the financial emergency.

Market Risk

The most common type of risk with equity investment is market risk. As the name suggests, it is used to indicate the potential risks associated with the current market conditions. For example, the recession and slow down economy can have a negative impact on the share market. Note that market risks are not confined to a specific industry or a company. They are considered as the macro risks that affect the share market as a whole.

As serious as the market risk sounds, it opens up several opportunities for investors to purchase stocks at a fair price and earn high returns in the future. That’s one of the reasons why a majority of investors wait for the market recession and slow down the period to make a lump sum investment.

Performance Risk

Performance risk is associated with the poor performance of a particular company or a sector. These types of risks affect a particular industry, such as healthcare and banking. You can’t control the performance risks, but it can be minimized by diversifying your investment portfolio. The impact is not as serious as the market risk, but performance risks are quite common in equity mutual funds investment.

Social and Political Risks

Other risks that can affect the equity market are social and legislative risks. These types of risks indicate the downturn in the stock market due to the social and political changes. For example, if the government of a country restricts foreign businesses, then there is a high chance the local business of the company will thrive. This will result in the growth of the company and the value of its shares. On the other hand, if the government lifts all these restrictions, the local business will suffer. As a result, the share value of the companies will decline.

The only way to mitigate the social and political risks is by diversifying your investment portfolio. It is, therefore, important to invest in the shares of different companies.

Is Equity Investment the Best Option for all Investors?

As mentioned before, equity investments are prone to high risks. If you are willing to bear risk, then equity investments make a perfect option. They can bring you high returns in the long run. However, this investment is uncertain. You could end up losing all your investment or a major portion of it if the underlying asset fails to perform well.

If past records are considered, then the equity market has often proven to be a useful tool for long-term investors. If you are looking for a short-term investment option, then the equity market might not be the best option for you. That’s because the market favors investors who stay put during the recession and hard times. Besides that, you need skills and knowledge to be able to ascertain current and future equity trends. You also need to take the market and stock liquidity into consideration before making an investment.

Gill Broking makes your Equity Investment & Trading Experience simple with major exchanges like NSE & BSE.

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The Share Market: A Guide to Trading – Gill Broking

It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

Names and contact details of all Key Managerial Personnel including Compliance Officer

Sr. No.Name of the IndividualDesignationContact NumbersEmail Id
1 Charanpreet GillCEO/
2 Charanpreet GillWhole Time
3 Charanpreet GillCompliance
4Manpriya GillDesignated
5Kewal GillDesignated

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