Your investments should be well diversified and properly reviewed from time to time. When we talk about reviewing equity investments, it simply means that any equity investment requires an adequate investment horizon and proper asset allocation for managing short-term volatility in prices.
It requires a lot of research work for identifying and valuing stocks for investment. Investment decisions should be based on both qualitative and quantitative research. You always need to have a practical approach towards identifying and acknowledging which stock is performing better. Your investments should be well diversified and properly reviewed from time to time. When we talk about reviewing equity investments, it simply means that any equity investment requires an adequate investment horizon and proper asset allocation for managing short-term volatility in prices. Tax implications also need to be checked before investing in any category of equity instruments.
Here are the three ways for you to make investments in equity instruments:
Under this criteria, research is done by the investor who himself takes the decision on what to invest, where to invest and the timing of entry and exit. An individual investment adviser generally invests his money taking risk on his own. This process of doing investments directly requires access to information which may not be easily available to common investors. You can also invest through brokers who can also provide research-based reports on stocks and investment scenarios which may be used by the investors. This can help the investors to understand the market volatility. Under this case, the costs of transaction and taxes are borne directly by the investor. However, managing your own portfolio requires time and skills.
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Portfolio Management Services (PMS)
This is a well-defined and managed process offered by banks, broking houses, mutual funds and other financial services industries where the investors can choose to invest through a PMS. Under PMS there is two type of services:
This is a process where portfolio manager solely takes the decision of making investments and manages the portfolio on behalf of the investor and he also takes advice from the investor as per his requirement. The discretionary process of managing portfolio goes hand in hand with the manager and the investor. This process is costly because it is totally managed by the portfolio manager.
This process, on the other hand, dependent totally on the investor’s decision where the portfolio manager only provides his advice and information, but does not manage the portfolio of an investor. Every decision and timing of the investment will be borne by investor only.
Investment via equity mutual funds
Mutual fund investments are the investment where portfolios are created and managed according to stated investment objectives. Further, the investments are done by the fund manager in various asset classes in which the money of investors gets invested in categories of equity, debt, gold or a combination of these assets.
Schemes are formed from a various mix of asset classes where every investor is a participant in that investment pool. Sometimes investors may also get affected by the decision of other investors to withdraw from any scheme or to invest additional sums. But eventually, doing so, you should always take the guidance of a financial adviser.
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Doing investments in equity mutual funds has the main objective of growth. The construction of the portfolio is done in such a way that there is an appropriate level of diversification and risk mitigation during the tenure of investment made for a particular goal.
Under this category, schemes are managed by fund managers who monitor investment decisions. A variety of schemes are present in the market focusing on different market segments such as large, mid or small, diversified, etc., keeping in mind that there are merely three types of investors – aggressive, moderate and conservative.
It is always advisable to know that the tax implications arising from portfolio decisions are attributed to the scheme and may have beneficial treatment which can be taken during the time of tax declaration under the I-T Act.