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Equity / Derivative Market

Buying and holding a share in a company is known as equity investment. Equity in general terms is the degree to which you own an asset, after all the debts associated with that particular asset are paid off. So when you buy shares of a company, you are doing an equity investment in that company. Equity market, often called as stock market or share market, is a place where shares of companies or entities are traded. The market allows sellers and buyers to deal in equity or shares in the same platform. In the global context, equities are traded either over the counter or at stock exchanges. Investors become partial owners of companies through equity trading. After liquidating all assets and paying off all company debts, the owners of equities in a company would get back the value.

Advantage /characteristic

  1. Dividends and capital appreciation
  2. Limited Liability
  3. Liquidity
  4. Create wealth over time
  5. Trade across exchange
  6. Diversification of Portfolio
  7. Exercise Control:
    When you invest in the stock of a company, you get the voting rights in it. Therefore, with the purchase of shares of a company you can exercise control and get ownership in the company. You can even participate in the shareholders or any other important meeting of the company.
  8. Higher Returns:
    The primary advantage of investing in equity is that it can generate high returns in a short time in comparison to other investment options like Bank FDs. Presently, the equity market is reaching all-time highs as it recovers from the Covid-19 setback of 2020. With appropriate stock picks and a solid trading strategy, the stock market can potentially provide you with unparalleled returns going forward.
  9. Beat inflation and facilitate wealth creation

Who should invest in Equity?

It’s important to understand that investing your entire corpus into equities is not a smart financial move. There are several factors such as your age, risk appetite, return expectation, and investment tenure, which impact how much you should invest in equity. Diversification across different asset classes and also in different shares and equity funds is essential to reduce the risk. It is advisable to take stock recommendations only from qualified financial advisors.

  1. Investors who do not have time to study the market
  2. Investors who are risk-averse
  3. Salaried employees
  4. Business persons
  5. Traders