What are the viable equity instruments that I can invest in? I’m looking for a mix of moderate to risk investment plan. I can invest Rs. 30000 per year.
While it comes to equities investment in India for the retail investors then there are very few instruments available in the market. As your investment amount is capped at Rs 30000 so you can’t invest through a portfolio investment schemes (PMS) or structured equities products. Such products require investment of Rs 5 Lac or more depending on the companies. You have following options for a moderate to aggressive return with respective associated risk:
a. Direct Equity Investment: You can open a DEMAT account with a reputed broker/sub broker and start investing. Here you can trade for intraday, short-term and long term return. The right stock selection is key to good return and minimizes the risk. So proper research is advisable while selecting a stock. There is no lower limit for investment.
b. Investment in Equities through Mutual Funds: It is quite safe compared to direct equity investment and return is also good. The investment strategy can be through systematic investment plan (SIP) or lump sum purchase. The investment can be started with minimum Rs 500. Your investment is managed by highly qualified fund managers so there is lesser risk.
You can opt for a mix of mutual fund and direct equity investment depending on your risk-reward requirement. In direct equity you can also invest in benchmark index fund such as NIFTY BEES or BANK INDEX BEES etc which are comparatively safer investment than direct equity. Some other equity based instruments in the market are ELSS and ULIP but the return is on lower side compared to above mentioned products.
You can, of course, invest in stocks. The selection of the perfect stock is the biggest challenge to wealth creation. The holdings of the world’s wealthiest people are typically made up of a small number of stocks, often no more than one or two. Therefore, finding the right stock for the long term is important. Do not base your entire equity investment plan on popular stocks or investment advice from a relative. Rather, look for companies with a long-term plan and potential for growth. Study their financials for the last 5-10 years. You must do a fair study of their revenue, CAGR, profit growth, debt levels and stock valuations. Additionally, look out for the future superstar stocks – young companies that may not have a ten-year track record but do have the potential for growth.
Many investors are not comfortable with direct equity investing. Even if they have a risk appetite, they may find researching stocks an arduous task. If this is the case, they may invest in equity Mutual Funds. Through these funds, you entrust a fund manager to decide which stocks to pick, buy, hold, or sell on your behalf. To pick the right Mutual Fund, you must look at the long-term performance of a fund (ideally five to ten years), its investment costs (every fund has an expense ratio), how it has compared to its benchmark, and the underlying assets of the fund. Want to invest in Mutual Funds? Click here.