Starting equity investing means opening a trading account and a demat account. Following this, one must test a strategy and then start deploying capital to the investment strategy.

Getting started with investing in equities requires the following

1)            Opening an account with a broker and a demat account for holding shares

Any share you buy with be held in demat form (ie in a paperless form) in your Demat account. To buy or to sell shares you will need a Trading Account. While getting these two accounts in place may sound complicated, once you approach a Brokerage firm, they will setup both, the Trading Account and the Demat Account. To start trading you will transfer money from your bank account to the bank account of your brokerage firm. Upon purchase of shares by you, the money you transferred initially will be used to purchase the shares and the share will be transferred to your Demat Account.

2)            Choosing an investment strategy

This is the most important aspect of your investment activities. There are myriad investment strategies and each of them have their own risk-return characteristics. You will have to choose which strategy’s risk return characteristics you are most comfortable with. Investors choose strategies that they can understand and implement. An intra-day investment strategy may suit one investor while a more long term holding strategy may suit yet another investor. Spend initial few days in reviewing certain simple strategies that you understand. Study and test your strategy as much as you can – there are strategies that work in 90% of trades but in 10% of the trades they make so many losses that the gains of the remaining 90% are wiped out. Retail investors generally choose the ‘buy and hold’ strategy because it doesn’t require day to day intervention in the market. However, a new investor can choose another strategy based on his or her interest levels and access to resources.

3)            Consider testing your strategy with a virtual trading account or with small initial trades

Some strategies can be tested with historical data. You can download historical data from some sites on the internet. After that you can start placing small trades to begin with. Once you are comfortable with your strategy, you can start placing some trades with real money. Gradually start scaling up if you see your strategy bearing fruit.

 

Disclaimer: Vitspan does not provide any investment related, tax related or financial advice. The information presented is done so without considering the investment objectives, risk profile, or economic circumstances of any reader or investor. The information presented may not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the potential loss of principal. Please consult your financial advisor prior to making investment related decisions.