Article

Making money through equity investments

17 Apr 2018

What is equity investment?

Every company requires cash to meet its present funding needs or development plans. An equity investment is an investment by persons or firms. The investment is generally in the form of stocks, wherein earnings are in the form of assets gains or bonuses. The investor ponders equity investments as the final method of making the best use of his capital. The investor recuperates his money only once he vends his stocks to others.

Equity investment can also be a fund for obtaining possession in a private business or as undertaking capital in fresh companies. The investor advances his revenue only once the company agrees to allocate the profits after liquidating the assets or while they sell their shareholdings to new investors. In the latter, the firm has to come across its responsibilities as the main concern.

How the stock market works!

An individual can buy and or sell any stocks of any company either through an online trading account or through their broker. As soon as you place the order, it's redirected to the related stock exchange, and the order is executed. Once the transaction is done, if it's a ‘buy,' then the stocks acquired are delivered to your demat account where they are kept in electronic form. If it's a ‘sell,' the stocks are taken out of your demat account and money is credited to your account.

Process of investing in equity markets

There are two basic methods that stock exchanges use to execute an equity trading:

•    Exchange floor

•    Electronic trading

1.    Exchange floor

Transaction on the floor of the popular stock exchange is a picture most of us have seen and cheered to on television. When the market is open, we see hundreds of people whoosh about shouting and screaming to one another, speaking on phones, staring at computer screens, and entering into deals with each other.

2.    Electronic trading

In this fast-moving world, the electronic market utilizes huge computer systems to match sellers with buyers and vice versa instead of human brokers. Many traders now favor this technique of equity trading.

Key benefits of equity investment

Below are the key reasons to invest in equity markets:

•    Wealth gains over the long-term

•    A decent source of revenue

•    Extremely liquid

•    Tax rewards

•    Corporate control

•    Limited liability

Conclusion

If you're interested in the stock market, it's recommended to trail market dealings and all related business news. This will aid you to comprehend if your broker is correct for you & whether your investments are meeting your goals.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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Making money through equity investments

17 Apr 2018

What is equity investment?

Every company requires cash to meet its present funding needs or development plans. An equity investment is an investment by persons or firms. The investment is generally in the form of stocks, wherein earnings are in the form of assets gains or bonuses. The investor ponders equity investments as the final method of making the best use of his capital. The investor recuperates his money only once he vends his stocks to others.

Equity investment can also be a fund for obtaining possession in a private business or as undertaking capital in fresh companies. The investor advances his revenue only once the company agrees to allocate the profits after liquidating the assets or while they sell their shareholdings to new investors. In the latter, the firm has to come across its responsibilities as the main concern.

How the stock market works!

An individual can buy and or sell any stocks of any company either through an online trading account or through their broker. As soon as you place the order, it's redirected to the related stock exchange, and the order is executed. Once the transaction is done, if it's a ‘buy,' then the stocks acquired are delivered to your demat account where they are kept in electronic form. If it's a ‘sell,' the stocks are taken out of your demat account and money is credited to your account.

Process of investing in equity markets

There are two basic methods that stock exchanges use to execute an equity trading:

•    Exchange floor

•    Electronic trading

1.    Exchange floor

Transaction on the floor of the popular stock exchange is a picture most of us have seen and cheered to on television. When the market is open, we see hundreds of people whoosh about shouting and screaming to one another, speaking on phones, staring at computer screens, and entering into deals with each other.

2.    Electronic trading

In this fast-moving world, the electronic market utilizes huge computer systems to match sellers with buyers and vice versa instead of human brokers. Many traders now favor this technique of equity trading.

Key benefits of equity investment

Below are the key reasons to invest in equity markets:

•    Wealth gains over the long-term

•    A decent source of revenue

•    Extremely liquid

•    Tax rewards

•    Corporate control

•    Limited liability

Conclusion

If you're interested in the stock market, it's recommended to trail market dealings and all related business news. This will aid you to comprehend if your broker is correct for you & whether your investments are meeting your goals.