Equity Investing Information

Stocks - Mutual Funds - Private Equity - Real Estate

Stock Market Investing

Investment in stock involves purchasing equity in a publicly traded company, via a stock exchange.

Companies often choose to sell shares as a means to raise capital for business ventures. The owners of many corporations will sell a minority stake to raise much-needed funding for the business, yet retain 51% (or more) of the company for themselves, so as to avoid relinquishing control.

The ability to purchase stock in the modern western world has made it possible for almost anyone to own a share of a successful company, and reap a portion of its profits. These profits are often distributed in the form of dividends, usually on a quarterly basis.

In addition to these dividends, investors are usually given some form of voting rights, allowing them to participate in the election of top executives.

Stock ownership also comes with the right to sell one's shares at any time over the open market. Prices are determined by supply and demand, and can fluctuate greatly over the course of a day or a week (especially in volatile industries such as energy and technology).

This has created the opportunity for some investors (day traders) to "play the market," buying and selling shares over very short periods of time and trying to pick out short-term trends and patterns in the market. This type of investing can be very profitable, but it is also highly risky, and only recommended for highly knowledgeable and properly trained traders.

The majority of long-term equity investors buy shares with the intention of holding them for a matter of weeks, months, or even years, basing their decisions on a company's long-term profit and performance expectations.

By diversifying one's investment across a number of different companies and industries, it is possible to eliminate many of the risks associated with short-term trading, and slowly profit from a corporation's business activities over time.

It is important to remember, however, that even cautious, long-term trading comes with its share of risk and should only be conducted by informed and educated investors. For those without sufficient knowledge and experience, a professionally managed mutual fund is generally a better solution.