Equity shares are one of the most common forms of investment. Before investing in them, it is important to know equity shares meaning. Equity shares tell the shareholders about the amount of ownership they have in a company. It makes the shareholder a part of the company’s loss and profit. Equity shares make you an integral part of the company, allowing you to participate in the company’s decision-making. The rise and fall in market prices determine the prices of equity shares as well. Often considered a long-term investment, a stakeholder only gets paid after all the debts of the company have been settled.
Significance of Equity Shares
One of the major aspects that make equity shares an attractive choice for investors is their high return value. Investing in them leads to maximum returns if the company is making good profit as the investor would be paid in proportion to the company’s profit. Another important thing is that companies often tend to provide dividends to their stakeholders. This is an additional sum to the regular profit that the investor was making. The dividend is a small proportion of a company’s profit distributed among its shareholders.
Investing in equity also makes stakeholders an integral part of the company. This allows stakeholders to offer a view and the right to vote in all the crucial decisions made by the company, thus giving a lot of power and insights to the stakeholders.
Another important aspect of investing in equity is liquidity. High liquidity rates mean that the shares are easier to buy and sell as they have a lot of enthusiastic buyers available all the time. Thus, an investor would never have a problem finding buyers to sell his shares. This also allows investors to make small-term profits.
There are always 2 sides to a coin and investing in equity is no different. With high returns come high risks as well. Since market prices affect equity shares a lot, this means fluctuations in market price would lead to changes in equity prices as well which could be bad for the investors. Also, since equity makes you a stakeholder in the company’s profit, an integral problem within the company or a poor business model, etc. can reduce the investor’s profit massively.
In conclusion, investing in equity is a high-risk – high-reward opportunity. One should invest in equity if and only if they are ready to devote a good amount of time to their investment as equity makes you an integral part of the company’s decision-making process. This means the investor just can’t invest and wait for the profits to come straight to his account, rather, they must play a part in the company’s betterment to ensure their profits. The investor must do good research before investing in a company as poor business models, and lack of trust of stakeholders are the signs of a dying business. Investing in a financially stable company is a low-risk factor.
Investing in equity can be done anytime and anywhere using a trading app. These apps allow you to invest in various stocks by displaying all the stats necessary for an investor to check before investing. Hoping you have a safe and profitable investing experience.