Who doesn’t love investing in equity? Your money grows so fast. Just read the newspapers. It’s full of discussions and opinions on the stock market. Which stock will go up? Which stock will fall? Then a query. I have invested in 100 stocks of XYZ Company. Should I hold it…Should I sell….
Equity is not all about stocks. Equity is also an investment in equity mutual funds. In an equity mutual fund, a fund manager decides where your money should be invested. He buys and sells stocks at the right time, making sure you get good returns on your investment. Unfortunately, all you and other citizens of our Nation, are only interested in methods to invest in stocks. In this article we will discuss 3 ways to invest in equity.
Remember: An investment in equity is very high return, but at high risk. Invest in equity only if you are comfortable handling/bearing risk.
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Yes…you do your research and invest directly in stocks. You decide which stocks to buy and when to buy them. You also make selling decisions. You decide which stocks to sell and when to sell them. To invest directly in stocks, you must understand them well and do your research. Investing in stocks without understanding them or doing your research, can mean losing a lot of money. Many of our citizens, who have invested without understanding stocks, have burnt their fingers and don’t want to touch them ever….
Invest in stocks only if you have time to do your research, knowledge of stocks and the stock market, know when to enter and exit (have a rough idea when to buy and sell stocks), understand that investing in stocks is subject to market movements/volatility and you could lose money, which makes this a very risky investment. You could also invest in stocks taking the help of your broker, who gives you research reports and different investment scenarios.
Portfolio management services (PMS) is a type of wealth management service, offered by banks, mutual fund houses and broking houses. Portfolio management services are of 2 types:
Discretionary portfolio management services:
Under discretionary portfolio management services (PMS), the portfolio manager is the sole and main decision maker, who manages your investment (portfolio). He definitely takes your advice and suggestions and you can state your requirement. You have to pay more for discretionary portfolio management services, as your investment is totally managed by the portfolio manager.
Non-discretionary portfolio management services:
In a non-discretionary portfolio management service, the portfolio manager only advices you on how to invest your money. The manager only gives you advice. He does not manage your portfolio. You have to make the decision on when/where/what/how much to invest.
When you invest in an equity mutual fund, a fund manager manages your money. You just have to choose a good equity mutual fund scheme to invest your money. The fund manager decides which stocks to buy/sell and when to buy/sell. The manager also decides how much of your money must be invested in stocks/equity, debt, gold or cash.
Remember : A mutual fund must have at least 65% of its net assets invested in equity, to be called an equity oriented mutual fund.
An investment in stocks and equity mutual funds has another BIG benefit. This is the tax benefit. If you stay invested in stocks or equity mutual funds for at least a year or more, any profits/gains you make, are called long term capital gains or LTCG. Long term capital gains are tax free. Be Wise, Get Rich.
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