What is Equity Delivery?

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  • 09 Aug 2023

In the ever-evolving world of stock market trading, where rapid transactions and quick gains often dominate the landscape, there exists a time-tested and steady approach known as equity delivery. Unlike its fast-paced counterparts, equity delivery offers investors a chance to embrace a more patient and enduring strategy to pursue long-term growth.

Equity delivery is a straightforward and traditional method of trading stocks on the stock exchange. When an investor opts for equity delivery, they are purchasing shares of a company to retain them for the long term. The shares bought through this method are transferred to the investor's demat account, giving them ownership rights and benefits such as dividends and voting rights.

Unlike intraday trading, where shares are bought and sold on the same day, equity delivery allows investors to hold onto their investments for as long as they desire. This approach is popular among long-term investors who believe in the company's growth potential and are not looking for quick gains.

  1. Long-Term Growth Potential: Through equity delivery, investors can benefit from the long-term growth potential of the companies they invest in, as they retain ownership for an extended period.

  2. Dividends and Voting Rights: Equity shareholders are entitled to receive dividends declared by the company and have voting rights in corporate decisions.

  3. Less Stressful Trading: Unlike intraday trading, equity delivery involves lower stress levels, as investors do not have to make split-second decisions.

  • Diversification: Diversification is a fundamental risk management technique that traders and investors embrace. Through meticulous research and strategic planning, diversification involves the selection of stocks spanning diverse sectors. This approach serves as a safeguard, as any external factor affecting the share price of a specific industry can be counterbalanced by the performance of shares from different sectors.

  • Patience: Stock markets are renowned for their inherent volatility, constantly testing the patience and nerves of investors. Amidst this turbulence, equity delivery emerges as a resolute strategy, granting you the freedom to retain shares in your Demat account for as long as you desire. It is natural for beginner traders to experience moments of panic, especially when witnessing sudden price fluctuations that lead to sharp declines in the value of their holdings. However, succumbing to impulsive decisions is best avoided.

Instead, it is crucial to maintain composure and trust in your analysis. Remember, even in the face of adversity, holding onto your stocks for an extended period can often prove advantageous.

Purchasing shares through the equity delivery order type involves a brokerage charge levied by the brokerage firm. This charge is deducted at the time of the transaction. While some brokers offer standard brokerage charges, others may present discounted rates through diverse subscription models, providing investors with more cost-effective options. It's crucial for investors to carefully consider and compare brokerage charges to optimize their investment experience.

To Sum Up

Equity delivery is a prudent approach for investors seeking long-term growth and stability in the stock market. By understanding the meaning of equity delivery and its associated charges, investors can make well-informed decisions while building a solid portfolio. Remember to choose a reliable stock broker with transparent charges and keep a long-term perspective while investing in equities.

FAQs

Creating a well-diversified portfolio is a prudent strategy crucial in mitigating risks associated with investing. The key principle is to avoid putting all your financial resources into a single share. Instead, opt for a diversified mix when purchasing shares.

In equity delivery, stocks or shares are delivered to the buyer after the settlement period, typically two working days after the trading day. However, in case of intraday trading, they are traded on the same day.

Under the latest SEBI guidelines on peak margin regulations, a significant change has been introduced for investors. According to the new rule, when you sell securities, only 80% of the proceeds will instantly be available to reinvest. The remaining 20%, known as the delivery margin, will be accessible only on the next trading day (T+1).

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