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What Is Equity Investment?

Equity investment refers to investing in stocks of companies that are traded on a stock exchange. By investing in stocks, one indirectly invests in the business of a particular company and hence receives the profit share from the business of the company.

The performance of the company's business directly impacts the stock price of the company. Hence, the company's stock price will increase when the company is performing very well and its business is prospering.

Investing in equity is high risk with high return. It is one of the best modes of capital appreciation among all the available investment options.

How It Works?

To buy a stock, one needs to have the following accounts

A Demat Account

Just as a bank account is needed to keep your money, a Demat account is required to hold your stocks. Demat is short for dematerialized (meaning virtual).

Trading Account

If you wish to buy and sell stocks, you will need a trading account. These are opened by government certified stockbrokers who facilitate buying and selling of stocks for a charge called "broking fees."

After opening the above accounts, you need to select the stocks that you want to buy. This requires comprehensive analysis of each company's business. Analyzing the stocks is an exhaustive and time-consuming process, best left to experienced investors/professionals.

Small investors can also participate in equity markets through the mutual funds route, where experienced professionals invest in the stock market on your behalf

Mutual Funds Companies are institutions that pool money from several investors and invest the same in various stocks, and charge a nominal fee for the same.

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