What is Equity Investment?

Equity Investment Guide – Types, Examples, Benefits.

In this Equity Investment Guide we will learn and understand about  – Types of Equity, Examples and Benefits of Equity Investment.

What is Equity?

Equity is any valuable asset like shares of a company, real estate etc.

Formula: Equity = Assets – Liability

Also Read:

• How Stock Market Works?
• Share Trading Mistakes to Avoid
• Share Market Crash – What to Do? Buy, Sell, Hold?

What is Equity Investment?

Investment in a company by buying its shares is called equity investment.

Also Read:

• What is Investment?
• Diversified Portfolio – Why?
• Investment Portfolio Management

Equity Investment Terminology

• High (high) : The highest price for the stock in the trading day.
• Low (low) : The lowest price for the stock in the trading day.
• Close (close) : The price of the stock at the time the stock market closes for the day.
• Chg (Change) : The difference between two successive days’ closing price of the stock.
• Yld (Yield) : Dividend divided by price
• Bid Price : Buyer’s price
• Ask Price : Seller’s offer price

Also Read:

• Stock Market Terminology for Beginners
• Where to Open Demat Account Online in India?
• Right Time to Buy Stocks

How to Invest in Equities?

The first step towards equity investment is RESEARCH. Before investing in stock of any company it is very important to do some research on the company. Do some research about management of the company, announcements of the company, dividend payoffs, corporate moves etc.

Check out the growth rate of the stock’s earnings and some historical data to understand what the company has done in the past. Get the current status of the stock movement using real-time quote, average trades per day, total number of shares outstanding, dividend, high and low for the day and for the last 52 weeks.

All this information will give you idea about the nature and performance of the company. Also try to access data about mutual funds and financial institutions who are investing money in the company.

With proper research and information, an investor can pick the right equity to buy and invest in.

Also Read:

• Best Investment Options for High Return
• Portfolio Vs Age – Portfolio and Age Relationship
• When to Buy or Sell Stocks

How Much Money to Invest in Equity or Share Market?

There is no fixed amount of money that an investor needs to invest in shares / stock. It depends on following factors:

1. Your risk profile;
2. Your time horizon; and
3. Savings

Also Read:

• Introduction to Stock Market in India
• Best Investment Options in India for Young Age Adults
• Mutual Fund SIP Investment @ Rs. 100 Per Month

Earning >> Expenses >> Saving >> Investment

It does not matter how much money you earn. It only matter how much you save. If your expenses exceed your net income even by small amount, you will have a miserable life.

Happiness is about managing your expectations. There is no end to what one can have – bike, car, Airplane? Hut, flat, mansion, Palace? Where does it end?

It does not. Richest people are not necessarily the happiest people on Earth. Money is good thing but it does not bring happiness unless you manage your expectations.

What I want to say here is that the more you save and invest, the more money you will have for your future and for your retirement.

• Also Read: What is Demat Account?

Different Types of Equity

S. No	Equity		Type
1.	Shares	:	Units of Partial Ownership of a Company. High Risk, High Return.
2.	Equity Mutual Funds	:	Capital from various investors is collected, pooled and invested in different Equity and Debt Instruments. It can be Large-Cap, Mid-Cap, Small-Cap or Multi-cap.
3.	Equity Futures	:	A financial arrangement between two counter-parties to buy or sell equity at a specified date, amount, and price.
4.	Equity Options	:	Equity derivative that give an investor the right to buy a call or sell a put at a set strike price prior to expiry date of the contract.
5.	Arbitrage Schemes	:	Simultaneous purchase and sale of the same asset in different markets to earn profit from tiny differences in the listed price of the the asset.
6.	Alternative Investment Funds	:	AIF are pooled funds from Indian or foreign for investing in accordance with a defined investment policy for the benefit of investors.

Benefits of Equity Investment

1. Capital Gain and Dividend: When you invest in shares of a company and price of the company rises or when the company makes a profit, you are rewarded with a share of the profit (dividend) and also the value of your shares rises.
2. Bonus Shares: Sometimes companies decide to issue Free of Cost bonus shares to its existing shareholders. This is win-win situation for investors.
3. Stock Split: Sometimes, companies split their stocks into several parts. This may reduce the share price of the company but your capital holding remains the same. This increases the liquidity of the share.
4. Liquidity: The shares you buy in a stock market have high liquidity. You can sell your shares at any point of time, at profit or loss and get immediate cash. Compare this with other investment options such as a Bank FD or a Real Estate Property.
5. Limited Liability: With Equity Investment, you hold a share of the company but your liability is limited to the extent of your investment. If the company incurs loss above your investment, you don’t have to bear that loss.

• Read: What is Intraday Share Trading?

Investment FAQs

Conclusion

I hope now to understand all about Equity Investment, Types of Equity, Examples and Benefits of Equity Investment.

If you have any question then please ask in the comment section below. Do SHARE this Article with others. Thanks!

Also Read:

• Public Issue of Equity by a Company
• How to Open Demat Account in India?
• Best Investment Options for Senior Citizens
• Fixed Deposit vs Savings Account – Which is Better Option?
• Fundamental Analysis of a Company
• Top 10 Best Textile Stocks to Buy in India
• How to Set Investment Goals?
• Types of Orders in Stock Market in India
• What is Investment Club?
• How to Pick Best Stocks to Buy in India
• How to Save Money?
• What Is Dematerialization in Share Trading?
• Top 10 IT Companies in India by Market Cap
• TSMC India
• What is Buying Limit in Share Trading?
• Securities Lending in Share Trading
• What is Rolling Settlement Cycle in Stock Market?
• How Much Money to Invest in Stocks and Mutual Fund
• How to Invest Like a Professional Expert?
• Top 5 Reasons to Invest in Stocks
• Top 10 Investment Banks in the World