Equity delivery or delivery based trading is one of the ways you can trade in the share market. In an equity delivery, you buy some shares, and hold them for some time in your demat account. In delivery trading, you can hold the shares for as long as you want, after they have been delivered to you. You have complete ownership of the stocks you buy, and can wait for an opportune moment to sell them at a good profit. This is in stark contrast to the other most common type of trading in shares, intraday trading, where you buy and sell shares within one trading day. You do not need to pay the full price of the stares in intraday trading. On the other hand, to buy shares in delivery, you need adequate funds in your account, since no margins are offered.
Tips to invest in Equity Delivery
Now that we have looked into what is equity delivery; let us look at some investment tips which will maximize your profits-
Mix and match- The saying ‘don’t put all your eggs in one basket’ holds true for shares too. Never invest all your money in one share. Always aim for building a mixed bag, when you are buying shares. You should do your research and then go for different companies from a variety of sectors. Shortlist a bunch of areas you find promising, and then choose companies that are trading in that area. Investing in different companies will benefit you because if any of those sectors have positive news, it will ensure profits for you.
Be Patient-The share market is an extremely volatile one, so, it will test your patience regularly. There is always a possibility that the shares you buy go down. The prices of all shares go up and down periodically. If you see the prices dipping downwards, do not fear the worst and sell your shares off. A huge advantage of delivery-based trading offers over intraday trading is that there is no fixed period in which you have to sell your shares. This increases your chances of making a profit if you keep calm. Most traders wait until the shares reach their cost price, and then sell.
Benefits of Equity Delivery
Delivery based trading offers a bunch of benefits-
- Since there is no time involved, you can hold on to the shares when the market is bad, and sell them only when the prices suit you.
- Some banks and finance firms give loans based on your shares. So, when you are going through a difficult time, your shares come in handy.
- If you see that a company is making profit,then you can announce a dividend per share. Then, holding shares of these companies will fetch you dividends on each share.
- When you keep your money in a bank, you get a yearly interest of 9% or 10%, at the most. However, in case you put that money into buying shares of companies that are growing, you can get returns that start from a minimum of 15%. Some shares will even give you returns as much as 30 to 40% in a year. The best share market gains are when you trade long term.
- In case a company makes a large profit, it might announce bonus shares. If they declare 1:1, it means that you might get a share free with the shares you have.
You should always do your research into the companies whose shares you are planning to buy. Try to buy the shares when the prices are below their fair price. This way, you will increase your chances of making profits. Knowing when to buy and when to sell is a skill that comes in handy for both intraday traders and delivery traders.
You may be wondering what is equity delivery charges. There are a variety of charges applicable when you trade in shares like service tax, stamp duty, charges of depository participant, amongst others.