What are the Advantages of Delivery Trading.
Is it true that there are some benefits of delivery trading over intraday trading. That would largely depend on your own trading perspective, but there is merit in that argument. We have seen that equity gives best returns over the long term. Take for example stocks like Infosys, Eicher, Aarti Industries etc. These stocks have multiplied manifold even as clients did nothing other than holding with patience. Delivery trading benefits are certainly
The advantages of delivery trading?
Before we get into the advantages of delivery trading, let us quickly understand what it entails. Delivery trading is about buying a stock, paying the full price and taking delivery into demat account on T+2 day. Now for some of the advantages of delivery trading in detail.
- Long term wealth creation: One of the big benefits of delivery trading is the long term wealth creation potential. Equity creates wealth in the long run and you can actually use equity over longer periods of time to meet long term goals like retirement. If you have the patience to hold a good stock, it can be a goldmine. That is certainly one of the delivery trading benefits.
- Less prone to volatility: One of the untold benefits of delivery trading is that returns on delivery trading are less volatile compared to intraday trading or even trading in futures and options. Low volatility reduces your risk and increases risk-adjusted returns.
- Corporate action benefits: Stocks like Wipro have substantially rewarded shareholders in the form of bonuses and stock splits. While bonuses and stock splits do not really create wealth, they reduce the price and create more investor interest. That is again one of the key delivery trading benefits.
- Wealth that can be leveraged: Not to forget that you can pledge your demat share value to raise funds. It can also act as your wealth statement when you need to give a net worth statement for a loan or for visa purposes.
A rather ignored benefit of delivery trading is that it develops an equity cult in investors at an early age when they have higher risk appetite and are best suited to invest in equity stocks.
How to start trading in stock markets?
Your journey to trade stocks begins with opening a trading account with a broker, a demat account and activating the account to start trading. The process is simple and once you activate your online trading account with the security checks, you are ready to trade on your own either on your laptop or using your share trading app.
How to read your demat statement
The demat account is a statement of holdings in your demat account. There are two ways to read the demat statement. You must read the demat holding statement and the demat transaction statement. The holding statement just shows you all the shares that are credited and still there in your demat account. The demat transaction statement gives a picture of how shares came in and went out (stock wise). This could be due to purchases, sales, bonus, splits, rights etc. It is always advisable to read the demat holding statement and demat transaction statement on a regular basis.
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Frequently Asked Questions
There are various approaches or strategies in delivery trading. There is the momentum approach, there is the growth approach or the value strategy to identify and buy and sell shares in the market. There is also the macro approach and the micro approach, which is also called the top-down and the bottom-up approach.
The golden rule is that you must pick stocks after doing thorough research only. Look at profitability, look at growth in the last five years, see if the company has too much debt, check their interest costs etc. Also check the industry they are operating in and the risks and potential of that industry. Above all, look at the quality of the management and governance standards. They matter a lot in the final analysis.
Yes you can and you must use stop loss. Don’t use stop loss in delivery trading in the same way as intraday trading. However, keep a longer stop loss below some long term support level and then take a call on exit if warranted.