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Equity

Equity is a share in the ownership of a company. It represents a claim on the company''s assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably.

Holding a company''s stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (to the extent of your holding) to everything the company owns. Yes, this means that technically, you own a portion of every piece of furniture; every trademark; every contract, etc. of the company.
As an owner, you are entitled to your share of the company''s earnings as well as any voting rights attached to the stock.

5 STOCK SELECTION GUIDELINES

There are more than 6,000 companies listed on our stock exchanges. Selecting companies whose equity shares you should invest in, becomes difficult due to this wide choice. To narrow down your choice,

1. Know the business

Warren Buffett, one of the world’s most successful investors, follows the philosophy of buying stocks of only those businesses that he understands.

2. Assess the past performance

All companies present details of their financial performance in their Annual Reports. In case of a company having its Initial Public Offering – IPO

3. Know the promoters

The promoters and management team of a company are the key people who drive its business.

4. Assess the future prospects of the company

Although a company may have performed well in the past, it is not necessary that it will continue performing well in the future

5. Assess the stock price

As mentioned earlier, the share price of all companies continuously fluctuate on the stock markets with investors buying and selling the shares.

SOURCES OF STOCK INFORMATION

Any financial educator will tell you about the importance of the well-informed investor. Investment in equity needs proper study and research before putting your money on the line. Use the following s