Rising inflation has made it clear that stock market investing is the most efficient way to beat it. So, there’s a spike in the number of people trading in various stock market assets. Delivery trading is also one of them. A trading account that allows for various types of trading can be obtained from a stockbroker. Likewise, most reputed stockbrokers such as Share India offer delivery trading facilities on their trading platforms with affordable delivery trading charges.
What is delivery trading? And how does it work?
To understand the advantages of delivery trading, it’s vital to have a proper understanding of it . So, let’s first start by defining it. Some of the trading strategies involve the actual purchasing and selling of securities. On the other hand, some facilities allow monetary settlements based on asset prices. Delivery trading mainly involves share trading. Its key feature is that the investors get their shares transferred to demat accounts. Investors’ securities get transferred upon executing their bids/orders. There is a debit from the seller’s demat account and a credit in the buyer’s account.
So long as investors receive stocks in their respective demat accounts, we consider it a delivery trade. One can sell his shares at any time in delivery trading. In delivery trading, one can sell his shares anytime. There isn’t any time limit for selling shares. A trader shall have the freedom to sell his stocks right after selling it, after a few minutes. However, one thing to note is that investors must have the full amount while buying shares. Similarly, while selling, you need to have the shares intact in your demat account. In other words, in delivery trading, we freeze the funds or the assets while placing our orders. For instance, when the order value is Rs. 5000, you must have Rs. 5000 or more.
Advantages of Delivery Trading
Let’s now look at the advantages of delivery trading.
No Fixed Time Limits For Trading Assets
The investors can keep the securities for any amount of time they wish..The assets will remain in your possession until you decide to sell them. The assets stay in your possession til the time you decide to sell them otherwise. This gives investors the edge in retaining shares that are trending in red. Investors can keep the stocks until they think selling will bring good profits. So, one can wait for price appreciation for a long time. Hence, there may be some delivery trading charges, but the strategy is best for long-term investing.
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Higher Returns in long term
You might already know, keeping money in a savings account or a fixed deposit account can earn you some interest. It is basically around the 5-6% However, investing in shares gives investors the chance of getting about 15% in returns. Delivery trading is one of the best ways to invest in good stocks and gain from price appreciation. Historical data shows some investors accrued up to 40% returns on some investments. Delivery trading fees are also relatively low with brokers such as Share India. So, the overall investments will help create an asset corpus in the long run.
Dividends as well as Corporate action benefits
Delivery trading brings in profits in the form of dividends. When you hold stocks for long enough, companies usually give dividends. In addition, the investors are set to profit from other corporate actions such as stock splits and bonuses. While it may not directly generate wealth, a reduction in asset prices is encouraging. So, regular trading may incur delivery trading charges, but it gives scope for profits from various avenues.
Option of SLBM
The Securities Lending and Borrowing Mechanism (SLBM) facility allows investors to lend existing securities and borrow them if someone wants them. On the SLBM platform, investors can lend and borrow assets among themselves. Delivery trading allows traders to go for SLBM too. This can earn additional profits for them as they get interested.
Short Selling isn’t an issue
While delivery trading does not put time limits on buying and selling assets, it restricts short-delivery trading. Short selling is a risky strategy. Only experienced investors with proper knowledge of such advanced strategies should try it. Short selling is not permitted in delivery trading by brokers.B Even though you pay delivery trading charges, you don’t get this facility.
Conclusion
Delivery trading entails the instant transfer of shares. Investors can buy or sell assets anytime, provided they have the assets and funds. It has many advantages, the key one being good profits in the long run. It is safer too, as one cannot short-sell shares. Moreover, investors profit from corporate actions.There is no need to be concerned about delivery trading fees. Brokerage houses like Share India have lucrative offers. One can choose from a bouquet of trading plans and take advantage of delivery trading.
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