In a company, the total capital of the business is divided into smaller units known as equity share.
When an investor owns the equity share of a company, he becomes a shareholder.
Equity is a stock/ share or any other security that represents an ownership interest in a company.
Investors earn returns by way of dividends and capital appreciation. On top of it, sometime they receive bonus or rights shares, which further maximizes their returns.
The choice of Investment Avenue can make or break the realisation of financial dreams. It is because of the forces of inflation and taxes. These tend to reduce the purchasing power of your money and impede faster wealth accumulation.
If you have been restricting you investments to only bank fixed deposits (FDs), then you might face difficulties in protecting your wealth. Sometimes returns on the FD after tax might be less than inflation rate too. Hence, inflation and taxes are always going to stay but your choices of investing can bring about a lot of difference in your rate of return.
The biggest risk of investing in equities is that the price of your holding can fall. Thus, if you sell at that time, you incur a loss. However, if you are a long term investor, this risk becomes lower.
Try to invest for the long term. Do not panic when the market, or your share or fund price dips.
Diversify your portfolio. Hold shares of different types of companies across industries.
Invest in funds that are exclusively equity and also have a mix of equity and debt.
When you invest in shares, you make capital gains on the sale of shares which are taxable. Capital gains is the difference between the selling price and purchase price of the equity share. The rate of taxation on capital gains depends on how long you stayed invested in the stocks. When you sell an equity share, listed on a recognised stock exchange, within one year from the date of purchase, you earn short-term capital gains. These will be taxed at the rate of 15%.
Conversely, if you sell a listed equity share after one year from the date of purchase, you earn long-term capital gains (LTCG). LTCG in excess of Rs 1lac are taxable at the rate of 10% without the benefit of indexation.
You can open a demat account with a broker firm to invest in the stock market.
You can approach a financial advisor who will guide you on how to open a demat account, what to buy, and then purchase the funds for you.
For all of the above, you will first need to complete KYC (Know Your Customer) verification.