What is Equity?
Equity1commonly referred to as shares represents ownership in a company. The total value of the company is – the total worth of a firm’s assets after paying off its liabilities. The value of one share is equivalent to the total value of the company divided by the number of shares.
The price of a share2the price of a share is simply at rate at which it is being bought and sold on the stock market (different from value) is affected by many factors –
- Financial stability of the company,
- The company’s earnings,
- Management pedigree,
- Competitive advantage in the industry,
- Market sentiments, among other factors.
Who can invest?
Anyone with investable surplus3any amount that you set aside for investing can invest in equities. What’s important is that one follows some kind of investment strategy and discipline.
“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part-ownership of a business.”
Why should I consider investing in Equities?
Let’s take an example – the stock of Maruti Suzuki was listed on the exchange at ₹ 155 per share on 9th July 2003. If an investor had bought 100 shares then, and held till today, they would be worth ₹ 10 Lakhs (as on date of writing this). That is an annual return of 32.10%, and the money invested has multiplied to 58 times. These numbers are without considering the annual dividends received, which would enhance the returns even further.
Sure, such success isn’t always the case, but if one has the discipline, and is investing for the long term, equities are the best asset class in today’s day and age.
When is a good time to invest?
The simple answer to this is when one gets a good deal. Because – “Price is what you pay, and value is what you get!”
So, when you get more value at a lower price, BUY!
How do I decide whether or not to buy a stock?
A stock’s valuation is done considering a wide variety of factors. Through this exercise, one computes the intrinsic value4true value of the stock. Then, this amount is compared with its market price, and if the stock is undervalued i.e. the market price is less than the intrinsic value so computed, one should buy, and if the stock is overvalued, then one should wait for the appropriate buying opportunity, or move to a different stock.
Where can I get started?
There are many good brokers with whom you can make your trading and Demat account5a demat account is an account where the shares owned by the account holder are stored. Much like the way money is kept at the bank. , but since you’re here, we would be happy if you chose us!
To get started, please open your account by clicking here.