Alas!!I coaxed myself to come up with another post which no doubt is the topic i can talk endlessly about boring one and all:-). But,to be frank this form of investment is the most rewarding and without doubt the most challenging too.This is the “Make or Break” of one’s investment.To start with,lets have Mr.IT explain ,
Understanding Equity & Equity Related Instruments
What is Equity
Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder’s equity or net worth or book value.Gibberish..lol..then lets go to a desi version:-)
equity refers to the position wherein whenever a company or organisation looking for money to expand,goes in public asking for their money:-).In exchange,the people are made the owners of the company,partially though and they are known as shareholders.
What this means in more refined terms that the investor becomes a part of the future of the company he/she has equity holding in it.
The investment angle is clear!!The company makes profit and so do the investor and unfortunately the opposite also stands true
But,with careful research and understanding it is indeed possible to cut down the risks and maximise the gains.Now,how do we get profit when the company gains.There are various ways which i will come to as and when i think i Can put across the financial jargon’s ahead without people cursing me.
Example of How Equity Related Instruments work
As,of now lets take the basic example.Lets say we put in rs.100 in a ‘A’ company now.Now,there are minimal two ways in how the money grows
1.with the growth of company,the value of our rs.100(in the form of stock/share) grows with the simple funda that the company is using our money to expand profits.and they get more investors surmising that the company goes higher.
2.when the company makes profits,they will distribute the profits amongst the stakeholders(Dividends).So,the investor gets a steady income on his investment given that the company does well and the investor stays with the company.
I know this is still a bit uneasy to comprehend but we can’t expect the money to reap benefits with we just sitting on it.This is Stock Market Basics Knowledge among others
To end the plight of whosoever will read it i l cut it short and just go bout citing the various equity related instruments:
a)Mutual Funds
b)Primary Market
c)Secondary Market
Hopefully,i will be successful in going bout these three cash-cows with the next posts being as lucid as i can
Till then Happy Saving!!!:-)
