Equity investment: 3 ways to invest in equity

Equity investment refers to participation in ownership of a business. Equity has the potential of high growth but is also considered a high-risk investment as compared to debt or fixed income investments. Hence, it is important to carefully choose the company before investing. Here are a few ways to participate in the equity.

Equity shares

Investors can purchase shares of a company to participate in its equity. In case of listed companies, shares are listed on the exchange and one can purchase them on the exchange itself. To be able to purchase shares of a listed company, a bank account and a demat account with a depository participant is a must. To be able to purchase or sell shares, a trading account also needs to be opened with the broker.

Investing through ETFs

Instead of investing in one particular share, it is possible for an investor to participate in the entire index (eg Nifty or Sensex). This can be done by purchasing exchange traded index funds listed on the exchange. The process to invest in such funds is similar to investing in shares. ETF investment offers diversifi cation of the investment.

Equity-oriented MFs

One can also invest in equities through equity-oriented mutual fund schemes. These schemes invest 65% or more of their corpus into equity-oriented securities. Investments in equity shares of various companies are made in line with the investment objective of the scheme. Investment in MFs can be made online through the MF websites and/or distributor-enabled MF transaction portals. Investment can be made in lumpsum or SIP.

Points to note

  • Gains from transactions in equity shares are subject to long-term and short-term capital gains.
  • It is advisable to avail services of a qualified and experienced investment adviser when it comes to equity investing.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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