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Equity markets (characteristics (SYSTEM T) (capital gain may arise on sale…
Equity markets
characteristics (SYSTEM T)
capital gain may arise on sale
security depends on NAV, level of gearing and risk profile of company
real return expected over long-term
volatile
dealing costs higher than conventional bonds
marketability depends on issuing company and whether listed or not- general worse than conventional gov bonds
tax treatment depends on territory
reasons for categorising equities by industry
most companies within an industry are affected by similar factors
resources
similar input costs
markets
affected by changes in demand (supply same markets)
structure
same financial structure, affected by changes in interest rates
info about these companies tends to come from a common source and presented in a similar way
no-one can be an expert in all areas
adds a structure to the decision-making process
cashflows on equities
share purchase
share price + dealing expenses
dividend payments
amount variable and unknown
timing generally known
expected to grow in line broadly with GDP
final payment if..
investor sells or company buys back
company winds up