- Posted by: Brighter Mind
- Category: Equity Investment
As a household or business owner, we save some part of our earnings for future use. These savings get channelized into various asset classes to protect its purchasing power and generate income.
Equity market or stock market works as intermediary to channelize these savings back into the economy. Through stock market, various business houses/corporate raise funds from the share market investors to finance their day to day requirement of money or to grow bigger through expansion.
A company issues shares and make them available to the public investors for the participation. These shares are listed on Stock exchanges like BSE, NSE and MSE.
As an investor, we invest our money into the companies that are listed on the stock exchange so that we can get good return on our investments.
The stock market can be categorised in to two different segments – Primary Market & Secondary Market. So, let’s understand the ways in which one can invest into different stock market segments:
A. Primary Market: Primary market is a segment where a company offer its shares for the first time to general public. A company comes with an Initial public offer (IPO) and lists it shares on stock exchanges. One can invest in these IPOs through their Bank accounts’ ASBA facility or stock brokers’ platform.
B. Secondary Market: Many companies have their shares listed on the stock exchanges and this is called as secondary market. BSE has nearly 3906 companies available for investment, while NSE has nearly 1350 companies in active status for investments. The list keeps on increasing with the listing of new companies on the exchanges on regular basis.
Process to get started:
- For direct investments, one needs to open a trading account with a broker member to invest into stock market directly or to apply in an Initial public offer.
- Once the transaction is made through the trading account for investment, the shares get credited to one’s Demat account.
- To invest via indirect route like mutual fund, PMS etc., one does not require to open any trading account and investment can be done directly through their bank accounts.
Different options to invest in stock market
One needs to understand the intricacies of stock market before taking an investment decisions. This is because investing decisions have many dimensions and rely on various factors. For a new investor, often it’s a tall task.
There are various ways which you can consider while starting your investment in stock market. Below are the options available to invest in stock market apart from doing it by own-self.
1. Mutual Fund:
A beginner can start investing in stock market through Mutual Fund route. Mutual Funds also called asset management companies are investment vehicles where funds are pooled from the investors and experienced fund managers invest these funds in the stocks and create a portfolio. An investor gets allotment of units as per the contribution in the investment pool.
There are nearly 44 Asset Management Companies (AMC) in India which offers various types of equity schemes like Large-cap fund, Multi-cap fund, Balance advantage Fund ,ELSS etc. You can choose the mutual fund scheme according to your risk appetite and start investment. This is very convenient investment option for newbies who have little or no knowledge and experience of the stock market.
A Portfolio management service (PMS) offers customised solution to invest in stock market. These are high ticket investment options which are suitable for HNI and Ultra HNIs. This is because the minimum investment amount needed to open a PMS account is Rs.50 Lakhs. One can invest in the stock market through this route as PMS Manager creates a portfolio by actively investing into stocks of companies. The investment method can be discretionary or non-discretionary.
Alternative Investment Fund (AIF) has similar characteristics like PMS as it is also a privately pooled investment vehicle to invest in the various assets like equity etc. Minimum investment amount required for AIF is Rs. 1 Crore. It is also suitable for HNI/Ultra HNI investors.
3. Do-it-yourself (DIY):
This is the most convenient way of investing in stock market. You can directly start investing in companies which are listed in the secondary market. You just need the Dmat account to get started. The only thing you should keep in mind is that you need good understanding of stock market and investment methods otherwise it becomes a risky proposition.
4. Equity Advisory:
Another direct way of investing in stock market is by taking experts advise. One thing to keep in mind is you should always consult a SEBI Registered Investment Advisor like Brighter Mind, who are authorised by SEBI to offer advise to the investors. They also offer customised equity investment solution to the investors based on their risk appetite. Hence if you are new to the stock market or a corporate professional who do not have time to research the stocks, you should consider taking help from these SEBI Registered Advisors.
5. Wealth Management Firms:
Many Banks have wealth management arms which offer customised and comprehensive services to invest in financial instruments. One can also start equity market investing with their advice.
6. Market-linked Insurance Plans (ULIP):
Many insurance companies’ offers products that invest some part of the investment corpus into equity market. Unit linked Insurance Plan (ULIPs) comes under that category. ULIPs are insurance plans that offer insurance benefit along with investment benefits by investing into stock market. This can also be an option for stock market investment but it limits the return potential of your investment as only a small portion of your premium is invested in equity market.
This is an indirect way of investing in share market. EPFO (Employees Provident Fund Organisation) is the statutory body of Government of India which cover social security of a person. EPFO has contributions from Employer and Employees. These pooled contributions have some part invested into stock market for investment returns. You can invest through these vehicles by increasing your contribution in the EPFO pool.
But the drawback of this investment vehicle is that it limits your contribution toward equity investments. Also, it is inferior option as compared to other investment options as it fetches very less return on investment.
No matter which investment option you choose to invest in stock market, you should always consider equity market investing for longer term. You should always be thoughtful about selecting an investing option and review it periodically.