Live Market Watch
Equity

WHAT IS EQUITY?

UNDERSTAND ITS RIGHT MEANING TO REAP THE BENEFIT.

   
 

equity shares 150x150 What is equity ? Understand its right meaning to reap the benefit

 

What is equity?

 

This question is running in every Indian investor’s mind. Why? Because equities have done very well in past 10, 20, 30 years but investors are not able to make money.  What is equity – a share, market,  a fund or an asset class?  Yes! Full details relating to Equity will be explained to you and help you in creating wealth.  So read it to understand the right meaning of equity & reap the benefit.


If as a Financial Advisor we ask you to invest in Equities or Equity oriented Mutual Fund, the typical reaction is – "We don’t want risk in our investment but we want decent returns too".  Equity has of high rate of return and its impact over long run.  Even though equities share have given the wonderful returns over long run not only in India but world over, Indians are not really comfortable investing their money in equities.  Less than 6% of their investments are into this asset class whether directly or indirectly.


Just to give you comparison how equities have delivered returns over last 30 year, look at the graph below. The graph shows you how Rs. 100 invested in different asset class fared over last 30 years ending March 31st 2010.


return comparison What is equity ? Understand its right meaning to reap the benefit

 

What is Equity? Lets understand, what exactly Equity is all about?

Equity is nothing but ownership; ownership in Business.  Equity is the capital amount which is raised or contributed by the members or shareholders of the company.  The net worth of a company represents the ownership interest of the shareholders (common and prefered) of a company.  For the reason, shares are often known as Equities.  For example, if you hold 10 shares of  XYZ Company out of total 1000 shares floated by the company – you are 1% owner in XYZ’s business.  So if XYZ will make profit you will get your share from dividends and price appreciation but if company makes losses your capital will go down(that will be reflected in stock price).  A general question – If we ask you to start your own new business, how much time do you think you would like to give before you start thinking whether its really worth it or not- 1 Week, 1 month, 1 year?  You  must be thinking that we are joking.  Ideally we should think for some long time when we enter in any legitimate business. But this common principle we don’t really apply when we invest in other’s business which can be done through shares/equities.


When we buy equities, we start looking at the price next day or next week.  For many who call themselves investors, long run is 1 month. But do you think the management of the business of which we buy shares really looks at their business growth in such a short period.


tree 150x150 What is equity ? Understand its right meaning to reap the benefitIn equities, the rule of Farming applies

This basic rules states that:-

1. You first have to sow a seed.

2. Keep watering it for it to grow.

3. Wait for some time with patience.

4. With passage of time, you will get fruits of your hard work and patience.

But when it comes to equities, we think that HAATHON MEIN HI SARSO UGTI HAI.  We want good return in short time. How many of us really think of equities for long horizon.?  We keep Gold for generations.  Grandparents go for bank fixed deposits for their grand children,  but no one invests in share of banks, say HDFC Bank for their kid’s marriage. And, no one plans to invest in equity Mutual Fund for their retirement.


Fundamental Investing & Speculation

Equity give you two kind of return, one is speculative and another is fundamental growth.  95% of the investors in shares are here for speculative gain, that is gain  from the short term price movement of shares.  They start TIMING THE MARKET  rather giving TIME IN THE MARKET.  This approach for short term gains is the real cause of loss.  Investment for long run is not only rewarding but also beats inflation by a good margin and creates wealth.  Now think of Indian business or Indian Economy for next month, you will be clueless but think of it for next 5 years, 10 years. We know that you are aware of the answer.

 

Risk Involvement

Now people call equity risky. Unfortunately risk is not understood by many investors. In short run, risk is in volatility of price of underlying asset i.e., how much it can rise and fall given a period of time. But in long run risk is not volatility but the risk is to maintain the purchasing power of your money. Look at the price of petrol in last 30 years(in chart 1) and then compare it with your return in FDs, gold, Endowment or Money back Plans. 


Why people don’t make money in Equities?

Looking at the graph above, it must be clear that equities do give returns. But the question still remains unanswered that if Equity gives returns, Why people don’t make money out of equities. The answer lies in their EMOTIONS. The two basic emotions Greed & Fear will make you feel comfortable when the markets are going up and feel disheartened when the market goes down, even though one really don’t need to sell at that time. Always remember that equities is a long term investment and after you invest if emotions are making you restless, think about forgetting this investment. Checking daily profit or loss and anticipating the future growth as no meaning and is futile exercise.


In the end, invest in equities, but as a long term investor and partner the Indian Growth Story.

Schedule a Meeting With Us

Name
Email
Mobile
City
Captcha Code 

IPO News


Bumper debut: Neogen Chemicals ends with 23% premium at Rs 264 At closing price, Neogen#39;s market capitalisation stood at 614.98 crore
Wed, 08 May 2019 16:45:39 +0530


Strong listing: Neogen Chemicals debuts with 17% premium at Rs 251 Thanks to the heavy buying, the stock was locked at 5 percent upper circuit
Wed, 08 May 2019 10:06:54 +0530


Neogen Chemicals to list equity shares on May 8 The issue price is fixed at higher end of price band of Rs 212-215 per share.
Tue, 07 May 2019 20:56:37 +0530


Neogen Chemicals IPO subscribed 41 times on strong support from investors The reserved portion for qualified institutional buyers has seen subscription of 30.49 times and non-institutional investors 113.88 times while retail category oversubscribed 16.06 times so far.
Fri, 26 Apr 2019 21:30:05 +0530


Neogen Chemicals IPO fully subscribed; retail subscription at 3.15 times The reserved portion for qualified institutional buyers was subscribed 95 percent and for non-institutional investors was 1.12 times while retail individual investors#39; category has seen subscription of 3.15 times.
Thu, 25 Apr 2019 18:19:49 +0530


Subscribe to Neogen Chemicals: Mehta Equities Mehta Equities has come out with its report on Neogen Chemicals. The research firm has recommended to "Subscribe#39;#39; the IPO in its research report as on April 25, 2019
Thu, 25 Apr 2019 13:43:16 +0530


Neogen Chemicals IPO opens today; should you subscribe? Anand Rathi said higher multiple is justified given the company’s ability to grow profitably and command better return ratios. Hence it recommended subscribing the issue
Wed, 24 Apr 2019 09:52:33 +0530


Neogen Chemicals IPO to open on April 24; here#39;s all you need to know Neogen Chemicals (NCL) is manufacturers of bromine-based, and lithium-based, specialty chemicals
Tue, 23 Apr 2019 08:58:18 +0530


Avoid Neogen Chemicals: Choice Broking Choice Broking has come out with its report on Neogen Chemicals. The research firm has recommended to "Avoid#39;#39; the IPO in its research report as on April 22, 2019
Mon, 22 Apr 2019 14:00:00 +0530


Avoid Neogen Chemicals: Choice Broking Choice Broking has come out with its report on Neogen Chemicals. The research firm has recommended to "Avoid#39;#39; the IPO in its research report as on April 22, 2019
Mon, 22 Apr 2019 14:00:00 +0530


Bumper Listing: Polycab India debuts with 18% premium at Rs 638 The Rs 1,345-crore public issue saw a massive subscription of 51.96 times during April 5-9, 2019
Tue, 16 Apr 2019 10:00:50 +0530


Metropolis Healthcare ends at Rs 959.85, a 9% premium over issue price Metropolis Healthcare#39;s market valuation was at Rs 4,814.90 crore on the BSE
Mon, 15 Apr 2019 16:34:19 +0530


Good Listing: Metropolis Healthcare debuts with 9% premium at Rs 960 The stock opened with a 9 percent premium over its issue price of Rs 880 while on the National Stock Exchange it opened at Rs 958.
Mon, 15 Apr 2019 10:07:37 +0530