What is Share and Equity Share?

Actual Question:

What is the difference between “Equity” and “share” in a share market?

Answer:

Dear Friend!

A very nice question. Thank you.

A share is a unit of the share capital of a company. Practically a company can have two types of share capital, namely:

• Equity Share Capital
• Preference Share Capital

 Preference share have a priority on payment of dividends and repayment of principal over equity share capital. Even though this looks like an attractive feature, the dividends are pre-specified and limited. Again at the time of liquidation they are entitled to get only the face value of the share and are not entitled to participate in the surplus available after discharging all obligations.

Equity shares on the other hand are more risky and therefore are attached with potentially greater rewards.

If a company has both equity and preference share capital, then there will be two kinds of shares - equity and preference.

So, a share is more a generic term or a mother term, equity and preference shares being its children.

In the world of stocks the word equity is used to represent equity shares.

What are generally traded on the stock exchanges are mostly equity shares only.

Thank you,

With Best Regards

Anand

How to Start Investing in Mutual Funds?

Actual Question:

How do we start investing in mutual funds, and which types of mutual funds are there?

Answer:

Dear Friend!

Even though the easiest way would be to pick the phone and call a mutual fund for doorstep customer service, I would advice you not to do this. The marketing advisor from the fund, most probably knows nothing about investing and only blurt out prerecorded, jargon filled, platitudes about the schemes for which he or she has been given steep targets.

You must first know about what mutual funds really are, what kinds of funds are there and what schemes will suit you.

Since I have answered similar questions many, many times, instead of repeating myself, I will guide you to these previous answers. Please study them carefully:

• How Good are Investment Advisors?
• Definition of Mutual Fund
• Types of Mutual Funds
• How to Choose the Right Mutual Fund to Invest?
• How Frequent Changes to Mutual Fund Portfolio Affect Investor Interest?
• Miracle of Compounding

 I suggest that after carefully studying the above and other related posts, you please choose only a low cost, well diversified, equity mutual fund. Keep the investments intact for a very, very long time.

I once again repeat that please do not go by the advice given by marketing executives of the funds or so called advisors.

Thank you,

With Best Regards,

Anand