Equity Investments |
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When you buy a share of a company you become a shareholder in that
company. Shares also known as Equties. Equity is all about buying
a business. When an investment is made, a part of the business is
purchased. Hence it is imperative that factors are weighed, in totality,
before an investment is carried out. Some fundamental questions
have to be answered?
(1) Age of the Company (2) Promoters track record (3) History
and Current Holding of the Promoters (4) How; When; and Why capital
was raised? (5) Pay out ratio including Bonus. (6) Micro fundamentals
and Macro situation (7) Competitive advantage – global perspective.
Equity is all about managing risks to reap the rewards. Remember
risks always-commensurate rewards. Identifying good company is
an ART full of Science and Philosophy of investment is an Artistic
Science The risk as well as reward is high in share market investments.
If you invest in shares, which are fundamentally strong, then
the risk of losing your principal is less. If you invest in dead
shares, then you could lose the money invested with no gain. You
should take care of the money you invest in shares and invest
in fundamentally strong shares which has good growth potential
in the middle and longer term.
The following is an example on stock price appreciation
.
| Year |
2001 |
2007 |
| 1. Reliance Indusries |
306 |
2989 |
| 2. Tata Steel |
87 |
1048 |
| 3. Tata Motors |
99 |
998 |
| 4. Maruthi 375 |
375 ( 2003 ) |
1737 ( 2009 ) |
| 5. ONGC |
135 |
1385 |
| 6. ACC |
151 |
1315 |
| 7. BHEL |
139 |
2930 |
| 8. GRASIM |
274 |
4051 |
| 9. AIRTEL |
22 ( 2002 ) |
1184 |
| 10. ICICI |
88 |
1349 |
Now you can see the capital appreciation on equties over the mentioned
period. Over the direct Investments for short tem, medium term
and long term in equities consistently outperforms comparing with
most other types of investments. Although share prices rise and
fall still the case that investment in a sensible spread of shares
over a reasonable period will typically yield a significantly
higher return than that offered by building society investments.
But it is not simply the rise in share prices which gives you
a return on your investment - but you also get income in the form
of dividends , Bonus and these should rise to reflect a company's
continuing prosperity.
Therefore, Equities are considered the most challenging and the
rewarding, when compared to other investment options. Research
studies have proved that investme nts in some shares with a longer
tenure of investment have yielded far superior returns than any
other investment.
However, this does not mean all equity investments would guarantee
similar high returns. Equities are high risk investments. One
needs to study them carefully before investing.
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