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WHAT IS EQUITY?
Equity is owing to the assets that may or may not produce debts and other liabilities associated with it. It is a measure for many accounting purposes that give the accurate value of an asset. The equity shares can either be applied to a single asset or multiple assets to expand the operations which can raise cash according to a set schedule. The Indian equity market can be utilized with the help of a trading account. The trading account helps to trade in the stock exchange in India, and the markets like the National Stock Exchange, Bombay Stock Exchange. BSE equity is one of the most famous and widely used indexes in India. Equity can also be considered as a degree of ownership in a firm which is calculated by subtracting the total liabilities. In the share market, both stocks and equity mean the same thing which is owning a part of the company.
6 POINTS ON EQUITY MARKET
There are certain points that one should keep in mind while investing in the stock market. Some of these points are-
- The amount that is to be allocated to equity which is one of the first doubts that needs to be understood and cleared. Each investor has a risk-bearing capacity which cannot be increased further than the limit. Trading on equity is accompanied by certain risks. The allocation may be increased or decreased according to wealth, age, and liabilities.
- The main concern of the investor is whether they are investing in the market risk or the stock risk. This means that investing in a stock has various risks associated with it and the market also is associated with risks. The risks are inflation, interest rates, currency movements, and other market risks like volatility, liquidity, etc. There are two specific risks like stocks or sectors.
- A really important point to be considered is the number of stocks one should hold in their portfolio as there is no particular rule about that. The maximum number of stocks is 10-12 which are all diversified because if one holds very few stocks, the benefits reduce.
- The question that arises is whether one should focus on buying a stock with a high dividend yield. Usually, people invest in long term investments for future gains because they increase the value of the company.
- A fundamental rule of investing in the stock market is to understand and analyze the stocks that the investor buys thoroughly. This is done to stay within the circle of competence because when one buys a stock they need to check the numbers, the news, and the market. Randomly buying stocks has adverse effects like losing money or having insufficient gains.
- A very realistic approach should be formed because there are two sides to investing in a market. The first being that whenever one invests in equities they need to prepare their mind for any kind of losses as according to the historical reports out of all the people who invest in stock markets only twenty percent achieve their desired result. The rest of them either go wrong and have to face flat returns or losses and quickly exit the stock.
CONCLUSION
In conclusion, it can be understood that investing in a stock market comes with various advantages and disadvantages. The equity market is a huge market with numerous opportunities that needs a lot of understanding, knowledge and experience in order to be successful.
