What is a Direct Equity Investment?

Direct equity investments refer to those investments made by investors directly in the stock market for buying the company shares/stocks. In other words, the money invested in the shares of the company is termed equity. In legal terms, the investor is buying partial ownership of the company to get the voting rights. Investors require a demat account for trading in shares. This account can be a personally managed account, or a broker/dealer can manage it.

Some investors who understand the working of equity markets can directly purchase stocks/shares of the company and plan their investment portfolio. Also, they can find the right balance between risk and returns. On the other hand, some investors can find it difficult to understand business fundamentals and technicals. Hence, they should invest in direct equity under an expert’s guidance. 

Who Should Opt for a Direct Equity Investment? 

Direct Equity Investment is suitable for investors who are willing to take risk and more importantly have the necessary know-how. Investment in direct equity requires adequate knowledge and skill. Market linked investments are not suitable for investors who have low-risk tolerance levels. Hence, investors with limited time or experience can invest in equity mutual funds instead. 

Direct equity investment requires investors to stay invested for the longterm. Investors need to understand that stock markets are volatile, and therefore, equity investments can lead to substantial swings in the short term. It is advisable to stay invested in tough times as the markets move upwards historically in the long run. Also, direct equity offers attractive returns to the investor at a commensurate higher risk. Hence, if you can embrace the market volatility, stay invested for the long term, and have the right pick for investment, you can maximise growth in your investment portfolio.