How To Become an Equity Investor

Equity generally refers to company stocks traded in the open market.

The two major open market platforms in the United States are the New York Stock Exchange (NYSE) and the Nasdaq. Both platforms allow for investors to purchase shares easily either through a live stock broker at a brokerage firm or over the internet through a discount brokerage firm. The NYSE is considered the premier platform, because it has stringent requirements for companies that want to list on it. For instance, a company must prove that its revenue exceeds $50 million dollars per year before it can be considered. The Nasdaq on the other hand has lower requirements, and even has a subsidiary which offers companies with revenues of less than $1 million dollars in revenue per year to list.

The general rule of thumb with equity investors is that conservative investors tend to prefer investing with companies on the NYSE, and more aggressive investors lean more toward the Nasdaq. This is because companies that are more stable and have more resources are less volatile. In the same respect, companies which are less stable and have fewer resources tend to fluctuate rapidly in the marketplace, which attract aggressive investors to the potential of fast money.

When considering becoming an equity investor, one must realize that they have to know what they are investing in. It is unwise to invest in a company when you don't know what they do, don't know how much money they are making or losing, have no idea how much debt they are carrying, don't know who the management is, are unaware of the companies they are doing business with and who their competitors are. These questions are part of what’s known as fundamental analysis. Fundamental Analysis focuses on the company stock as opposed to the marketplace as a whole, whereas technical analysis focuses more on the marketplace than the individual stock.

Technical analysis is a study in the ups and downs of a particular stock and takes into account the marketplace environment. A technical analyst may want to purchase a stock at its year low and sell it at its year high. This process is much easier said than done. There have been many theories and software programs trying to successfully execute profitable stock transactions using technical analysis. Day traders often use technical analysis. It is considered a very risky endeavor.

In conclusion, be careful and do your homework. The equity market is hugely complex and the majority of average equity investors lose their money. The psychology that goes into play is largely responsible. For example: When do I buy and when do I sell? It can be stressful being an equity investor!


Share this article!

Follow us!

Find more helpful articles: