One common concept that is misunderstood today is – the equity market and the stock market are assumed to be different. So, let us get started on knowing what the equity market is, and how it is a synonym for the stock market as a whole. The words equity market and stock market are interchangeable. Both terms relate to the buying and selling of ownership shares in public corporations via any of the several stock exchanges and over-the-counter marketplaces in India and around the world.
What is the Equity Market?
An equity market is a market in which company shares are issued and exchanged, either on exchanges or over-the-counter. It is one of the most important aspects of a market economy and is also known as the stock market. It provides firms with access to cash to help them expand, as well as investors with a stake in a company with the possibility to profit from their investment based on the company’s future success.
Equity markets serve as a meeting place for stock buyers and sellers. The securities exchanged in the equity market can be either publicly traded stocks (those that are listed on a stock exchange) or privately traded stocks. Private equities are frequently sold via dealers, which is what an over-the-counter market is.
When a company is formed, it is a private company. After a set period of time, it goes through an initial public offering, also known as an IPO, which is a procedure that transforms it into a public company listed on a stock exchange. Private stocks work a little differently because they are only available to workers and a select group of investors.
Equity Market and Stock Market
A share of stock is an equity stake in a firm. That is, the investor purchases an ownership position in the firm with the intention of getting a portion of its earnings in the form of dividends, or profiting from the increase in the stock price, or both.
Why do You Need to Start Investing in the Equity Market?
1) Don’t you want to be someone who keeps pace with inflation?
Inflation is described as a condition in which prices rise while the buying power of money decreases. Inflation happens in an economy when the total amount of money increases. Overall, inflation is unfavorable to the average person. In India, inflation has been about 4-5% for the previous few years. The annual return on a savings account (interest rate) is about 3-4 percent. As a result, a savings account cannot outperform inflation.
Overall, if you want to combat inflation, you must invest wisely in high-return investment products. And the stock market is the ideal location for wise investors to invest.
2) It is a change in the cycle – your money works for you, and you do not work for your money
Money is essential for purchasing luxuries and in all other facets of life. Most individuals claim that they do not labor for money and that a shortage of funds is at the core of the majority of issues. Investing, on the other hand, is the solution to this dilemma.
If you put your money into good firms, all you have to do is sit around and do nothing. As the firm grows, your money will expand. Meanwhile, while your money is increasing on its own, you may devote your time to your principal work or to anything else you desire. In this manner, you may make your money work for you, as opposed to your primary employment, where you must labor for money.
3) Got a phone? Got an internet connection? That is more than enough for you to start investing
Investing and trading using an online brokerage account is now much easier. With the aid of renowned online brokers, you can now buy and sell stocks using your smartphone in seconds.
Furthermore, with the proliferation of financial websites and applications, discovering and picking stocks has become easier. You no longer need to go through all of the tedious financial periodicals and journals, nor do you need to rely on newsletters to obtain the company’s financial data.
4) The gems are not always hidden
There are a number of additional examples of common stocks that have returned more than several hundred percent in recent years. Asian Paints, Hindustan Unilever, HDFC Bank, Symphony, Maruti Suzuki, Titan Company, and others are examples. These businesses are well-known to the general public. People may readily locate such thriving businesses around them because they already use their products.
To summarise, it is not usually expected to discover a hidden gem or an extremely rare/unheard chemical stock. All you have to do is seek around for great firms with amazing goods and invest in them.
5) Don’t you want that extra income without the hustle?
Getting a high-paying, safe, and secure job was constantly taught at our school. What isn’t taught is what happens if you’re dismissed or the firm goes bankrupt. We should always have a variety of sources of income. Stock market investment can help ordinary individuals generate this extra source of income.
Most individuals spend their whole lives devoted to their jobs. Investing in the stock market may be a second source of income for those folks. They can steadily develop extra revenue through value appreciation and dividends. This is why individuals should begin investing in the stock market.
6) The sooner the better
While there are some good reasons not to buy stocks, for most people, the upside potential outweighs the danger. As a result, investing in stocks is virtually always a wise decision, even when the market is at an all-time high. According to studies, an investor’s time in the market is more essential than timing the market. Waiting for the perfect timing to buy stocks can be expensive because a major part of gains occurs over a short period of time.
When you are in the equity market your investments do not limit you. Just remember, you have much more to explore and so many types of investments to unbox. You get the opportunity of investing in equity shares, bonds, mutual funds, ETFs, and so much more. Irrespective of the fears of risk, but it is time to take that small amount of risk for big-time benefits.