What do you mean by trading on equity.

Trading on equity is buying and selling of company stock shares with the motive of investing them at higher rate of interest. The shares of different publicly traded companies are traded through stock exchange or through over the counter markets.

1. What do you mean by trading
on equity?

2. •Trading on equityis buying and selling of company stock shares with
the motive of investing them at higher rate of interest. The shares of
different publicly traded companies are traded through stock exchange
or through over the counter markets.
•Stock market is the core of economy as it ropes in necessary capital
required by the companies on one hand and on the other it enables
the investors to enjoy a slice of ownership in companies with the
prospective of availing gains in the form of dividends in tandem with
the company’s future performance.

3. •Trading on equity is done on two markets viz. The primary markets –
wherein new issues are first offered and secondary markets –wherein
subsequent trading takes place. It in fact means to raise fixed cost
capital which is the mix of borrowed capital and preference share
capital keeping equity share capital as the base to facilitate increase in
income of equity shareholders. It is the situation when the company
incurs new debts to acquire assets which enable the company to earn
greater amount of return as compared to the cost of interest of the
debt.

4. •Trading on equityhas two paramount benefits.
•Increased earnings: As it allows an entity to earn a disproportionate
amount on its assets.
•Favourable tax treatment: Interest expense is tax deductible which
results in reduction of net cost of the borrower
This process has the capacity of earning outsized returns for
shareholders but it also carries in its orbit the risk of outright
bankruptcy in case cash flow falls short as expected. This also is
known by the terms financial leverage, investment leverage or
operational leverage.

5. •In nut shell trading on equityis the medium where in entity uses
bonds, other debts and preferred stock to enhance its earnings on
common stock. The earnings that are more than interest expense on
new debt will thereby increase the earnings of the entity’s common
stockholders. This increase is the clear cut indicator that the entity has
attained success in trading on equity.
•If you own a computer and are computer literate then you can always
go foronline equity trading. It is medium of trading in securities
online. This method has overwhelming advantage as it is fast, very
simple and efficient mode of trading. This mode gives you full control
of whatever actions you have taken.

6. •Online equity trading does away with the unwanted muddle of time
consumption, difficulty of going to another place to do trading and
handling lot of paper certificates. As with this mode and Internet
access you can deal in securities even in non market hours, it makes
your transaction paperless and consumes less time.
•Online equity tradingfacilitates easy access your account from
anywhere be it your home, office or any other place suitable to you.
This is the easiest and best suited option for NRIs to invest in Indian
markets. Above all Internet is the hub of information and one can
easily access information online through sites that are dealing with
securities.

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