How does equity investor make money?

Investments are made with the sole purpose of making profits and help in growing wealth. They are of many different kinds and you would end up thoroughly confused trying to understand various sort of investment product. The categories can be broadly divided into investments whose return is either market-linked or fixed. 

A lot of this is also dependent on risk factor such as in the case of equity investment, everything is market-based so returns are never assured. Investors who are willing to take high risk generally take this route as it can bring huge profits. 

What is an equity investment? 

Market-based investment is usually of two kinds – equity and non-equity investments. Equity investment refers to buying of company stocks and equities. This also makes the investor a part-owner of the company whose stocks he or she is holding. Profits derived from such an investment is directly linked with company performance and the investor also gets voting rights, which makes them part of the decision body who appoints the management. 

Equity investing and wealth management are highly suited for anyone who wants to grow wealth through high returns. Though it also requires high-risk appetite as you have to be willing to take big chances. 

That’s why it is very important to make informed choices before investing in stocks. Company profit and stock price are interlinked and hence you have to pick a company which is consistently earning profits. This will ensure that you enjoy long term growth and earn profits at a steady rate. 

Ways of earning profit

Equity investment comes with great returns and it certainly gives you many options for earning money. Some of these options are listed below:

• Dividend– When you invest in a company share then you become part owner which means you are entitled to a share of company profits. Some companies choose to distribute profits in the form of dividends and this allows the company to earn a good amount on his shares.
• Capital Gains– Equity investment is directly linked with the market so if the company performs well then the market value of the stock goes up. This allows investors to make more profits over the course of time. Sometimes, you can even earn 50 times more of what you had invested in the first place.
• Rights Issue– Another way through which equity investor can make more money is by purchasing new shares at discounted prices and selling them at a higher rate. Often companies allow existing shareholders to purchase shares at a discount and investor can make huge profits by selling them in the market.
• Buy back – You can also make money by selling your shares back to the company at a much higher price than the market rate.

Equity investment is among the most popular way to make your money grow fast and many of the wealthiest people in the world make use of this investment product. Though, it is also important that you have diversified your stock purchase so you have multiple options. This way if a potential company does not give you the desired result, you can replace it with another option. Also, make sure to put in a lot of research and take necessary guidance before investing.