What is Equity Investment?

Investing in the stock exchange has always been big part of business in the United States, but now, with the many stocks lower than they have been in years, more people than ever are investing in the stock market. Many of the investments are equity investments. This is because, although investments on equity don’t give immediate returns, in the long run they are safer bets than many other types of investments.

Thousands of people are already inadvertent equity investors, because the money deposited in a bank or credit union is then invested in the bank’s portfolio. Most equity investors never hold the actual securities, or certificates, that they own. Often they rely on the bank that they hold their account with, or with a fund manager, who has access to the stock certificates.

Equity can be defined as the value of a property, or company, minus any debts or liabilities incurred by the company. Investing in company’s equity means that you will own a share of the company, in form stock certificates, and these stocks are devaluated by the amount of debt held by the company. For this reason, it is important to look at the company’s management efficiency, and determine whether they are making the most profit off of the resources that they have available.

One unlikely source to look for investment opportunities is the web. Even though the dot com bubble has well and truly gone, there are still opportunities to be had. These can range from small and low risk investments – such as this beer making website which was recently acquired – to more obscure offerings like holiday advice portals and specialist music networks. While some of these may seem lacking in the value, to the training eye these are excellent low cost, high reward profit centers and should not be ignored or dismissed.

The most common form of equity investments though are professionally managed equity investment funds, like mutual funds. These types of funds are called pooled share funds. This sort of fund makes things easier on inexperienced investors, as the fund manager will do most of the work. Segregated funds are what institutions and individuals make use of if they want to be more active in the investment. Venture capitalists are investors that invest in the equity of start-up companies. These ‘loans’ are higher risk than investing in an established business, but if the company takes off, they investor will get very high returns on the initial investment.

The stocks that are owned through equity investment do not usually entitle the share holder to actively have a say in the direction and management of the company. It doesn’t give the individual the rewards and responsibilities of direct oversight. The only type of stock that even comes close to giving individual share holders a say in the company, are common stocks in certain companies. These sometimes give stock holders voting privileges pertaining to the particular kind of stock they hold. A share in the company’s equity simply means that you will have a portion of the company’s gains or losses, which result from the management decisions of the company, on a daily basis.

Comments are closed.