Do’s and don’t of Equity Market.
The Equity Capital market is very demanding for investors. If you have hunger in belly and if you are prone to risks, then only equity capital markets are your cup of tea.
The equity capital market is a market between companies and financial institutions. Equity capital market is the place where company raises capital for their companies. The equity capital market consists: overall marketing, distribution and allocation of new issues; initial public offerings, special warrants, and private placements. Along with stocks, the equity capital markets also manage futures, options and warrants.
Backbone of any equity capital market is information provided by companies who want to raise a capital from the market. Normally to raise a capital company floats an Initial Price Offering (IPO). Financial institutions like banks help to the company by structuring the offering. Advertising a KPO of such a company is also responsibility of related financial institution. Every financial institute has a separate capital market division. Sometimes they play other roles than structuring an IPO like underwriting equity derivatives, convertible debt, and hybrid instruments.
Biggest psychological advantage of equity market is it gives a sense of ownership to company’s shareholders. These equity holders can vote in decision-making of the company. Another advantage is though these types of stock are volatile and very risky; there is always possibility of monetary gains for investors. There is comparatively more chances to get dividends in equity market. Dividends are the main attraction for majority of investors. People’s investment decisions are influenced by dividends and monetary gains. Equity market place is for them to fulfill their desire. Unsecured against assets – gives zero protection to investors. To put another way, if the company defaults, the equity is not guaranteed against an asset, in the way a mortgage is guaranteed against a house.
But if you are a cynic who always prepare for the worst scenario then you might refrain from investing in equity market. If the company which has investment from you gets bankrupt then you will be the last person to get your money back.
If your investment portfolio is not that big then we strongly recommend that don’t go for equity market. As mentioned earlier this place is very volatile and unfortunately if you loose your investment it could be a fatal accident for your portfolio. So for small investors investing in equity market is not that great idea.
Investment newsletters and twitter are the great ways to get current updates from equity market. Companies and financial institutions use the tool of twitter very effectively to gain foothold in equity market.
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