Entering the equity market can be an exciting yet challenging venture. The stock market can look like a complicated place for those outside the industry. But once you grasp the rules of investment and the conditions the stock market runs on, you have the opportunity to grow your wealth.
Before foraying into the equity market, here are a few things you need to take note of.
Equity in a Nutshell
Equity refers to a stock or share or any other asset representing an investor's ownership interest in a company. Simply put, if you bought a firm's share, you are part-owner of the said firm.
In addition, once you own shares of a company, you are eligible to receive a dividend of the profits they earn.
Equity investment works similarly to a fundraising activity conducted by a company. Rather than opt for an interest-heavy business loan, a company collects funds from the public. As a result, the people can purchase a part of the firm's share. That move is what you can call an equity investment.
2 Common Equity Options
Equity Shares
Equity shares represent a piece of a company's value. The overall value of the shares represents the overall value of the firm. Companies perform initial public offerings or IPOs when they want to list their shares in stock exchanges.
Equity Mutual Funds
Mutual funds are professionally managed investment funds that pool money from several investors to buy securities, such as bonds, stocks, and other assets of publicly traded and profitable companies. In other words, mutual funds are a financial vehicle that invests across various shares from different firms.
There are also other fund options like private equity and venture capital, although they are more suitable for experienced investors.
Investing in Equities : Getting Started
Figure out Who You Are as an Investor
The first step to investing in equities or any other assets is knowing what type of investor you are. Having an idea of your investor personality will help you determine how much capital you want to use and how much risk you can take.
Once you have those figured out, you can proceed with selecting investments that you want to hold and think about your long-term financial goals.
Choose Blue-chip Companies
First-time investors should consider investing in blue-chip companies since they have a low-risk factor that makes them a safe option.
Blue-chip companies are successful large-cap firms that have been operating in their respective industries for quite a long time now. They also have more financial stability than others and are some of the highly valued ones in the stock market.
Make Use of Modern Investing Technologies
With technology evolving to great heights of innovation in the fintech industry, there are now more ways and options to get advice on your investments.
Robo-advisor or expert advisor products are equipped with machine learning technology and algorithms that help investors make more objective decisions with their investments. By combining artificial intelligence with human inputs, an investor's portfolio has a better chance to go further.
