I. Definition of equity investment

Equity investment is the act of investing to buy a company's equity in order to participate in or control its business activities. It can take place in the open trading market, on the occasion of the initiation or establishment of a company, and on the occasion of the non-public transfer of shares.

second, the method of equity investment

1. invest rationally and do what you can

because of the high risk and high return of equity investment, the rational investment strategy is to take equity investment as a part of investment allocation, instead of concentrating all the funds on equity investment.

2. Be familiar with the equity investment cycle

The term of equity investment is usually more than one year, most of which are 1-3 years, and some even as long as 1 years. Individual investors must know the investment period of the equity investment they participate in, and the capital invested must match it. Otherwise, using short-term funds to participate in medium-and long-term equity investment will inevitably lead to liquidity problems.

3. The principle of participating in investment with own funds

The characteristics of long term and high risk of equity investment determine that ordinary individual investors should adhere to the principle of participating with their own funds. If financing investment is adopted, although it will produce the leverage effect of income, it will also lead to the superposition of risks. As an ordinary investor, it should be the best choice to participate in equity investment within the limits that they can bear.

Extended information:

Risks of equity investment:

1. Risks of investment projects

That is, due to poor management of the invested enterprise, horizontal competition, economic cycle and other reasons, adverse situations such as performance decline, shutdown, bankruptcy, etc., thus affecting the investment to complete the withdrawal of investment funds through listing, equity transfer, management buyback, etc., resulting in no investment income or even loss of principal.

2. Policy risk

Policy risk refers to the risk caused by market price fluctuation due to changes in national macro policies (such as monetary policy, fiscal policy, industry policy and regional development policy).

3. Risk of fund extension

Private equity investment projects generally have a long preparation period from negotiation to successful shareholding, and the original investment plan will be postponed or postponed at any time for various reasons, thus increasing the uncertainty of investment, which will bring the risk of fund extension;

4. Liquidity risk

Not all private equity investments can make a good ending by going public and cashing out. More investment projects may not be listed or can only be transferred within the original shareholders for various reasons, or the equity is difficult to cash out in a short time or can only be transferred at a higher discount price, which is not conducive to the flow of funds.

Reference: Baidu Encyclopedia-Equity Investment