Equity investing refers to buying and holding shares of a stock listed on a stock market, partial ownership of a private company, ownership of shares in a startup company that has not yet been listed on a stock exchange. Equity investing in startup companies is also called venture capital investing. It carries both high risk than other equity investing and the potential for substantially higher reward. What is equity investing for the investor? Depending upon the aim of the individual investor equity investing may be a means of building a nest egg. It may be a means of speculating on stocks with the hope of large profits if a company’s stock goes up greatly in price. It may simply be a means setting up a cash flow from stock dividends to use during retirement. What is equity investing for stock companies? It is a means of obtaining capital for business purposes without obtaining direct loans or obtaining loans by way of issuing bonds. For the investor interested in secure investments and building a nest egg, investing in companies with cash or in dividend stocks is the usual route taken.
What is equity investing for the speculator? It is the search for companies with volatile stock prices. It is the learning of technical analysis tools so that the individual can more reliably predict stock price movement. A person speculating in the stock market will plan to buy and sell equities over a short time span and not hold a stock portfolio for any extended length of time. What is equity investing for someone interested in startup companies? It is way of getting into the next big thing on the ground floor. Those with the expertise to recognize the next block buster technical application or genetic engineering miracle can not only earn huge profits from such investing but can also find themselves in a position of control over a major player in fields like bioscience, computer applications, and other high tech fields. This sort of investing in innovation can be highly profitable but most startups do not pan out so most venture capitalists put their money in a variety of companies with the expectation that the one or two that win big will pay for the rest.
What is equity investing for the stock company? It is how companies raise cash for new product development, building larger and more efficient facilities, and the like. By issuing stock the company does not need to borrow money and pay interest. However, by issuing too much stock a company will dilute its stock value. A common occurrence is for a successful company to buy back stock when it has cash in order to reverse the effects of dilution on stock value. For growing company issuing new stock will not necessarily lower stock price as people investing in growing companies will typically pay a growth premium. This is because the intrinsic value of the stock is really a reflection of its forward looking earnings potential. What is equity investing for the stock share holder? It is investing in the earnings potential of a company. For a successful and growing company equity investing can be a profitable enterprise.