Equity Research..

The topic of discussion is Equity market Investing. To start with the very basic stuff, equity share is a share in the profit of the company against an amount of money invested in the capital of the company. This is what equity investing is all about. If you stick by this code and simplify the problem in front of you, you will have the solution. Now the economic activities around the world have grown in geometric progression and has become just humungous to be able to be using just one term to be defining the above. Therefore, there are a wide number of terms that are used to explain the different no. of ways of doing the above. I am going to tell you about the different companies that do equity research and why they do it..?!
Companies undertake equity research in order to be able to decide, if a company is going to have future profits. If the answer is yes, then definitely invest in that company, if the answer is no, then move on to some other company. Why do they do it?! Let us see, if the Mr. Singh(honorable pm) were to tell you, Reliance looks like a good bet. You should invest Rs. 1000 crores in the company. Would you actually do it..?!I really doubt it. You would want to go and have a look at the business of the company, talk to its customers, directors, look at its properties, talk to its banks, talk to its other shareholders, have a look at the economy, the market it is operating in, and that is just the beginning. I havnt yet talked about the past performance of the company, the age of the company, the ethics of the company, the auditors, its international presence, the current investor holding, law suits and prospective liabilities against the company, etc, and the list goes to the extent of even forecasting the probability of the company’s manufacturing facility being hit by an earthquake and its precautions and recovery measures against the same. Think of those 1000 crores as your own and then decide, would you not consider doing the above as a minimum consideration before taking the plunge. Now, sometimes, you leave the safety check before the bunjee jump in the hands of the professionals and take the plunge. In the same way there are a few research companies, that do just that, help you bunjee jump. So, there are companies, doing research for investing own funds, and helping others invest. Either ways, you have to have one trait while doing equity research, be sure about what you are saying. If you know that you should invest in a company, you should know why you want to do it and be able to write it down in paper, so as to convey your intent and reason behind the same. One important point I must have missed out on above, is that the kind of research that you do, depends on the amount of money involved in the business. If you are investing a hundo, then a word like ‘buy reliance’ from a finance idiot like me, may be enough research.  However, you are the one who decides for your money, how much research is actually sufficient. The above was a brief answer to why research. I would love to give you a piece of my mind on ‘How research?!’..

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