Read before Invest in Equity

 

                 Equity represents the value that would be returned to a company's shareholders if all of the assets were liquidated and all of the company's debt were paid off. We can also think of equity as a degree of residual ownership in a firm or asset after subtracting all debts associated with that asset. For example, if you own a car worth Rs.25,00,000, but you owe Rs.10,00,000 on that vehicle, the car represents Rs.15,00,000 equity. It is the value or interest of the most junior class of investors in assets.

                An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. These shares are typically traded on a stock exchange.

                Besides determining the value of a company, equity is important to businesses because it can be used to finance expansion. Funding business expansion by selling shares of stock to investors is “equity financing.” When a company sells stock, it sells equity to investors for cash that it can use to fund growth.

                 An analysis of various assets shows that equities have given the best returns during periods of high inflation, albeit with higher volatility. Stocks have returned 19% a year, followed by bonds (8.8%) and fixed deposits (7.4%). ... "A number of retail investors have not gained from equities' performance over the long term.

                 The rule of thumb says that the percentage of funds that should go towards equity investment is 100 minus your age. If you are 35 years old, you should invest 65% of your money in equity.

                 Equity trading is very simple. All you need to do is purchase shares of a company. To do so, you need a demat and an equity trading account. You will then have to link this trading account to your savings bank account to transfer money easily for the purchase of equities.

                 Stocks are generally riskier than bonds, so an equity fund tends to be riskier than a fixed income fund. ... These kinds of funds also tend to have a greater risk of a larger drop in value—yet the greater the risk, the greater the reward (or potential for higher returns).

   

                                                            Happy Investing