CA Aaditya Jain is well known amongst the students as Finance Guru & Best CA Final FM SFM Faculty, the stock market guru with the motto of Learn More Earn More.
His classes are a perfect blend of Concepts and Practical knowledge on the stock market. His classes are not only exam-oriented but job-oriented as well, as he helps the students to explore various career opportunities in the field of finance during the batch.
Here we have bought the simplest explanation of equity investment. Let’s say a company needs to raise money. The common way of raising money for a business is a business loan. But the drawback of a business loan is that one has to return the money to the lender with the agreed interest irrespective of profit or loss in the business. Instead of availing a business loan, businesses can raise funds from the public by giving them a share in the ownership of the business. When a company goes out to collect money from the general public, we can buy a partial share of the company which is called equity investment. Unlike a business loan, the company will not return you the money you have invested but will give you a dividend of the profit earned by the company.
The functioning of stocks depends on the ownership dividend of the corporation which is selling the stocks. If a company’s ownership is divided into 100 parts, so will be the profit. The company will have the final call on whether to distribute the profit among the shareholders or to reinvest the profit in the business. The company can come out with an IPO (Initial Public Offering) where the shares of a company can be bought and sold. The public listing companies can sell their shares in the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) which are the biggest marketplace for an equity share. A company must have a public listing to sell and buy stocks in the equity market.
Once you are ready with all your requirements, you can start buying and selling shares. You are to inform the broker about the share you want to purchase at which price. You can order your broker to sell or purchase a particular quantity of shares at a prefixed price given by you. So the broker will sell or purchase shares when the price will come equally to your prefixed one. The order of transactions is valid for a fixed time. If the share prices never come to your desired price within the time frame, the order will be canceled and you will have to raise another request.
The investment in the stock market must be done after checking the past performance and future potentials of the company in which you want to invest. The hasty of less informed decisions can make you land in hot water at any given time. Above all, if you are investing in the stock market keep your expectations realistic.