Question

Identify and explain the different types of classification for equity investments. Why is the held-for-collection classification not applicable to equity investments?

Answer 1

Equity Investment is nothing but investing in a company by acquiring the equity shares of the company. Individual investors, as well as the institutional investors, invest in the equity shares due to many reasons. The most important reason is to acquire a huge return. Types of Equity Investments are as under:

1. Individual equity Investment: Under this retail investors purchases the equity share of a company.

2. Equity Funds: This is practically mutual funds. In this type of investment, we give fund to a trust and trust investment in equity share on our behalf.

3. Private Equity Investment: Under these investments are made in a not listed company.

Generally, equity investment is held for long term purpose and held for collection generally applies for short term purpose and thus not applicable for equity investment.

I hope I have clarified my point, in case of any doubt please give your comment and in case you are satisfied then please gives thumbs up.