Companies need capital for meeting their current fund requirements or growth plans. An equity investment is an investment by individuals or firms. The investment is usually in the form of stocks whereby profits are in the form of capital gains or dividends. The investor considers equity investment as a long-term strategy of maximizing his wealth. The investor recovers his money only when he sells his shares to others.
The equity investment can also be fund for acquiring ownership in a private company or as venture capital in infant companies. The investor gains his income only when the company decides to distribute the proceeds after liquidating the assets or when they sell their shareholdings to other investors. In the latter scenario, the firm has to meet its obligations as priority.
Checklist for Investors before making an equity investment:
Good record of accomplishment and expertise of the management.
An impressive business plan that is detailed and accurate.
Return on investment and the time duration.
Details on the limited control after investing.