Equity investments offer ownership in companies and potential for income through dividends and capital gains. This overview covers the basics, compares equities to other assets, and discusses the equity method in accounting. It also explores diverse equity forms and strategies for crafting effective investment portfolios, emphasizing the importance of diversification and insights from prominent investors like Warren Buffett and George Soros.
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Equity shareholders have ownership rights and are entitled to a share of profits and potential gains from an increase in share price
Common Stocks
Common stocks offer voting rights and potential dividend income
Preferred Stocks
Preferred stocks provide fixed dividend payments but lack voting rights
Convertible Bonds
Convertible bonds can be converted into equity shares, benefiting from potential appreciation
Mutual funds and ETFs allow investors to pool their money and invest in a diversified portfolio of equities
The equity method is an accounting technique used for investments in associate companies to reflect the investor's economic interest
The equity method involves recording the investment at cost and adjusting for the investor's share of profits or losses and dividends received
The equity method provides a realistic view of the investor's stake in an associate but can complicate accounting procedures and result in earnings volatility
Effective equity investment strategies combine long-term and short-term perspectives
Diversification across different sectors, asset classes, regions, and time frames helps in risk management
Analyzing the investment approaches of successful investors such as Warren Buffett and George Soros can provide valuable lessons in equity investment
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Holding ______ shares of a firm like ABC Limited gives the investor a right to a share of the ______ and possible gains if the stock value goes up.
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profits
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Equity Investment Rights
Grants ownership, voting power, and profit claims in a company.
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Bonds vs. Ownership
Bonds provide interest income but no company ownership or profit entitlement.
