3.0 Let's Talk Equity
What is Equity?
Key Terms Related to Equity
Key Terms Related to Equity
Learn about the basics of equity through simple examples!
Key Terms Related to Equity
Key Terms Related to Equity
Key Terms Related to Equity
Learn about some key terms related to equity!
3.1 What is Equity?
Equities are also known as shares or stocks. In simple terms, equity is nothing but the value of anything net of any liabilities.
For eg: If you have 10 chocolates in the fridge, but have borrowed 2 chocolates from your friend (ie debt/liability), then your net equity value is 8 chocolates. Equity is not considered an asset or a liability but is something you get when you subtract liabilities from assets.
By definition, equity is the money and assets that are contributed by the owners of a company to fund it. In the case of organizations that are big and become public companies (owned by the general public as well as original owners), the shares are traded among multiple people and organizations on a stock exchange.
The ownership of these shares makes you an owner of the company with power proportionate to the size of your holding. Ownership of these shares brings you returns such as hefty dividends (a certain percentage of money paid to you out of the profits made by a company). These are your equity investments.
However, equity investments carry both risks and rewards.
Rewards: Advantage of extremely volatile prices of stocks in hopes for profits from spikes. These returns are often high (more than debt investments in almost all cases)
Risks: No guarantee of returns as there is no obligation on the company to pay a fixed dividend.
Our team at finsnap is here to help you determine and understand the interesting world of the stock market.
DISCLAIMER
Before you start thinking of equities and mutual funds, here is a note of caution!
Teenagers can't operate their own brokerage account. You will need to be at least a minimum age - 18 years old in India to participate directly. This restriction is a legal requirement specific to Securities and Exchange Board of India (SEBI) ruled participants, however, you can get an adult (parents only) to open a minor account and operate it for you.
Once you have an adult operated minor account for demat account (where you get your non-paper or dematerialized shares and certificates) and trading account (through which you buy and sell shares) you are all set to reap the joys of investing in equities and mutual funds.
De Jargonising Equity
STOCKS/SHARES
STOCK EXCHANGE
STOCK EXCHANGE
An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. These shares are typically traded on a stock exchange.
STOCK EXCHANGE
STOCK EXCHANGE
STOCK EXCHANGE
It’s a platform where securities(debt and equity instruments can be traded). In India, the 2 dominant exchanges are National stock exchange(NSE) andBombay stock exchange(BSE)
INDEX
STOCK EXCHANGE
Index Type 1 : SENSEX
Since an individual investor cannot keep track of every company’s stock prices, there are two indices that are used to track the direction of the Indian stock market. (gives an idea of the collective trend of the market during a certain time i.e whether prices are rising or falling on the whole). These indices are calculated daily. They are Sensex and Nifty 50.
Index Type 1 : SENSEX
Index Type 1 : NIFTY 50
Index Type 1 : SENSEX
Stock market index for Bombay stock exchange(BSE). Comprises of the market holdings of the top 30 companies listed on the BSE. It is calculated by adding up these holdings and dividing them by a number called the index divisor. The figure obtained is then counted in ‘points’.
Index Type 1 : NIFTY 50
Index Type 1 : NIFTY 50
Index Type 1 : NIFTY 50
Stock market index for National stock exchange(NSE). Comprises of the market holdings of the top 50 companies listed on the NSE. Calculated in a similar manner.