Equity investment refers to the trading of stocks and bonds in the share market. It is also referred to as the acquisition of equity or ownership participation in the company. An equity investment is typically an ownership investment, where the investor owns an asset of the company.
In this kind of investment there is always a risk of the investor not earning a specific amount of money. Equity investment can also be termed as payment to a firm in return for partial ownership of that firm. An equity investor, in some cases, may assume some management control of the firm and may also share in future profits.
In order to understand equity investment properly, it is necessary to see the technical and fundamental analysis. The technical analysis of equity investment is primarily the study of price history of the shares and stock market.
A fundamental analysis of equity investment involves the study of all available information that is relevant to the share market in order to predict the future trends of the stock market. The annual reports, industry data and study of the economic and financial environment are also included in the fundamental information of equity investment.
Mutual Funds and Segregated Funds
Mutual funds or other forms of pooled investment measures are equities held by private individuals but managed and governed by prominent management firms. These types of financial holdings allow individual investors to diversify their holdings and avoid potential loss. Segregated funds, on the other hand, are used by large private investors who wish to hold their shares directly rather than in a mutual fund.
The prime advantage in investing in a pooled fund is that it gives the individual access to professional advice through the fund manager. The major disadvantages involved are that the investors must pay a fee to the fund managers and that the diversification of the fund may not be appropriate for all investors. In those cases, the investors may over-diversify by holding several funds, thus reducing the risk.
Last Updated on : 5th July 2016