What is Equity ?
Equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock.
Rule 1: Be a Investor, Not a Trader
Unlike Trader, Investor is one who has long term perspective view on stock. The equities usually goes through the bullish (upward) trend and bearish (downward) trend in a cylic manner. Identify the bearish trend and buy the stocks.
Put time and effort to understand the markets, economy, industries and companies. Study about stock’s performance and company growth in future and invest money when you have done enough analysis.
Rule 3: Buy at right price
Buy the equity at the price that you are comfortable paying based on your analysis. Don’t respond to the market sentiments (i.e. when others buy or sell don’t get tempted to follow them).
Rule 4: Diversified portfolio is best
“Do not put all your eggs in the same basket”-This will make you reduce risks and maximise your returns by investing into Fixed deposits, mutual funds and equities. While investing in equities, invest in different sectors.
Rule 5: Focus on fundamentals
Never get tempted to market sentiments, do fundamental research about the company by analysing the ratios, balance sheet and then consider buying, if th stocks are strong fundamentally.
Rule 6: Understand the business of the company
Try to understand the business operations of company, before investing so that you will get to know the future of the company. This will make you understand the effects of economy and industry changes on the company’s business.
Rule 7:Invest your money
Never borrow money to invest, since faulty investment may lead to loss. So, always try to invest the surplus money that you will not need in immediate future.
Rule 8: Invest regularly and gradually build up your portfolio
The stock market seems to be volatile. Investing money in small amounts, when the markets are bullish, so that you can invest more in bearish markets by reducing the purchase price.
Rule 9: Monitor your portfolio
Check the companies you have invested, compare the results and the performance of the company. Thus you will be able to sell the shares when the company faces any serious trouble from the
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1 Comment
Excellent advise. The Golden Rules will put you an extra step or two toward your financial goals.
Keep up the good work.
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