Equity investment refers to putting money into a company by purchasing its shares, which grants the investor partial ownership of the company. Essentially, it’s buying a piece of the company’s future profits and assets.
Here's a more detailed breakdown
What it is:
Equity investments are made by buying shares of a company’s stock, making the investor a shareholder and a partial owner.
How it works:
When a company issues shares to the public, investors can purchase these shares, becoming owners of a portion of the company.
How it can be earned
Returns on equity investments come from dividends (a portion of the company’s profits distributed to shareholders) and potential capital gains (the increase in the share price).
Types of equity investments:
Individual stocks: Buying shares of a specific company.
Equity mutual funds: Investing in a diversified portfolio of stocks through a fund managed by professionals.
Private equity: Investing in private companies, often through venture capital.
Risks and rewards:
Equity investments offer the potential for high returns, but they also carry a higher risk compared to other investments like bonds or fixed deposits.
In essence, equity investment is a way to share in the growth and potential profits of a company by becoming a partial owner.