“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part ownership of a business.” – Peter Lynch
A Stock Market or Equity market has buyers and sellers trading in Equity. Companies issue & trade shares to raise capital. The buying and selling of these shares is an Equity Market.
Equity Market is a meeting point where the buyers and sellers trade in either Public Stocks or Privately Traded Stocks. Public Stocks are listed by the stock exchange; Whereas Privately Traded Stocks are sold by brokers, usually Over-the-Counter. Most companies begin trading privately and once they go through an Initial Public Offering (IPO) they get listed by the stock exchange to be traded as Public Stock.
In Equity Trading the investor owns a part of the company, so when the company does well the value of the stocks are high. The opposite holds too; if the company fails to perform the stock price can collapse, risking your investment. This is precisely why it is important to complete some fundamental analysis of the company you plan to invest in:
Financial Analysis- Check to see how healthy the company’s balance sheet, profit margin & other financial statements are.
Technical Analysis- Look into the company’s past data & statistics. This could help guide a trader towards what the future holds. A good brokerage firm can help navigate this with ease.
Check the company’s interest rates given on Debt Securities. Risky ventures offer much higher interest rates.
Risk Assessment- Constant market research is a must to help avoid fraudulent companies.
Futures & Options trading– Also known as a Futures Contract, it is an obligation to trade in an asset at an agreed-upon future date. Options Contract, the investor is given the opportunity to buy or sell an asset at a set price but isn’t obligated to do so. Both instruments are Derivatives and so a high risk- high return profile. It is safe to say that these particular instruments are best traded through professionals.
Trading in Equity, Futures & Options comes with immense possibilities of high returns. Financial pressures of rising costs and maintaining lifestyle standards can easily be managed when you invest in the above instruments. However, it’s important to note that a lot of these instruments rely on strategic trading & informed choices. The right brokerage firm can help mitigate the risks involved, so choose the right partner in your financial journey!