Making Money from Equity Investments

Category: Education

The term 'equity investment' means buying and holding shares of public companies trading on the Mumbai Stock Exchange. By buying the shares, the investor becomes a part of the company. It has a number of advantages, including the right to vote to hire management, share in profits and potential preference for new shares of the same company. Equity is one of the few ways to make a lot of money. Equity is for individuals or firms looking to play a 'high risk, high return' game. This is preferable for investors with relatively high risk appetite. This is because of the risk of losing the entire investment. Investing in stocks should be a wise and well-researched decision. The share price is directly related to the performance of the company. As a result, it is important to choose promising companies that will be consistently profitable, allowing you to grow over time. As mentioned earlier, when an investor buys a stock, he or she becomes the proportional owner of the company based on the number of shares purchased. There are five ways for investors to make a profit from equity investing: Dividends: As an owner, the investor is entitled to a portion of the company's profits. If the company chooses to distribute its profits as dividends, the investor receives a fixed amount for each share he owns. Capital gain: When the market value of a stock rises, the investor benefits as he or she can make a profit from the sale of the holdings. Over a period of several years, the investor can make up to 50 times more than his initial investment. Buyback: The Company may announce that it will buy back shares from its shareholders at a price higher than the market rate. Although not every investor wants to sell their shares, the buyback window allows them to make a profit. Rights issue: When issuing new shares, the company may offer discounts to existing shareholders. Profits can be made by buying shares at a lower price and selling them at a higher market price. Bonus issue: If a company performs exceptionally well, it can issue free shares to its shareholders. These extra shares quickly start trading at market prices, giving investors a better chance of making a profit. Visit squareoff.co.in to learn the stock market basics