Equity InvestmentsTerms and concepts of equity market investments

- Gayatri Jagdale

Penny stocks

Penny stocks are shares of small companies which trades at very low price per share. Its a high risk investments with a very short track record.

Market capitalization

Market Cap or capitalization is Market Value/Aggregate value of company.

Market Capitalization = Price of company shares × Number of outstanding shares

Stocks class based on market cap

Large-Cap Stocks: In simple words, large cap stocks are market leaders and well known as blue chip stocks, less volatile and gives decent returns.

Mid-Cap Stocks: These stocks includes companies that shown good track record and growth but more volatile than large caps. Risky but can deliver good returns in long term.

Small-Cap: Includes small companies that have potential to grow, most volatile than above 2 classes but should be there in equity portfolio for long term goals.

Over the counter stocks (OTC)

OTC stocks are those company shares which are usually not listed or traded on any exchange and therefore traded only over the counter

Value stocks, growth stocks and combination of both

Growth stocks referred to stock of a company who choose to invest its earnings into business to maximize its growth. These are generally small establishing companies with large growth potentials. Risky but can deliver large profits in long run.

Value stocks are of company who pay out its profit as dividend to its shareholders first and invest balance amount into business. These are large and established companies. Less risky and steady returns

Both stocks have their own advantages so mixing of both can benefit you more.

Buying on Margin

In simple words, margin is nothing but a loan. Borrowing money from broker for trading(using margin)using securities in account as collateral and charging interest on borrowed amount.

It is mostly use to make leverage but as it’s a kind of debt so should be use in right way.

Equity Portfolio

Keep limit on number of companies to invest and diversify across different sectors. Portfolio should be such that it is easy to manage and review.

Do research before buying individual stock. Lots of trusted web sites are available to get needed information.

Try to get information about company’s position through its cash flow statements, EPS, price earning ratios and management.

Implement Systematic Investment (SIP)Method in equity trading too rather than lump sum investments.

Educate yourself while investing.