Taking direct exposure to equities means buying equity of companies directly from equity market. As mentioned earlier investment in equities is riskier. Besides this form of investment needs knowledge of various valuation parameters, understanding of company fundamentals, ability to read and understand company balance sheets, P&L accounts, important ratios etc. Thus investment through direct equity tends to be more time consuming, riskier in terms of lack of adequate knowledge etc.
Having said that with risk also comes rewards. Direct Equity nvestment is high risk - high reward instrument. Direct equity investments provides superior returns than all other forms of iquity investment but are much riskier and time consuming. Direct equity exposure should be taken by those individuals who are experienced investors, having adequate understanding of underlying fundamentals. Needless to say the investor needs to have high risk appetite and long term investment horizon.
In my future post I will provide what some of the important ratios a shareholders should be aware of how it is calculated, its importance in determining valuations etc.
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