Investing Stock, Online Stock Trading, Share Market

Investment in equity is one of the most preferred modes for building long term investments and wealth. Research has proved that capital appreciation is highest over a longer period of time through investment in equity or capital market. Equity investment is not gambling or casino. If you treat it that way and avoid investing then you are missing opportunities of making money through absolute legal and healthy ways. After all performance of capital market is a barometer of economy and if economy is performing well, stock markets are bound to do well. The dizzying heights of stock markets in recent times have built enormous wealth for a large number of investors- both high net worth and retail and it makes sense to be a part of the bandwagon by using common sense and avoiding unnecessary risks.

Let us have a look at a few of the advantages of investing in equity and how equity investment helps you achieve both short and long term financial objectives. Your equity investment offers you the following advantages:

Dividends

Dividends are the periodical returns generated by your investment in the share capital of the company. This is your regular income if the company is performing well and is a reward for taking risk of investing in the capital. Companies generally reward their shareholders through dividend pay-outs, which give an indication that the company’s financial and profit situation is pretty good.

Bonus shares

If the company is sitting on a huge reserve, it also rewards its shareholders by issue of bonus shares. Bonus shares are additional shares allotted to existing shareholders on some predetermined ratio such as 1:2, which means one additional share for every 2 shares held by the shareholder. These shares are allotted with having to pay anything and hence the acquisition cost of investment is reduced to that extent.

Rights issue

Rights shares are allotted to the existing shareholders at a discount to the existing market price. The difference between bonus and rights is that while bonus is free, for rights, shareholders have to pay the discounted price. However the shareholders also have a right to renounce the rights, if they feel that the price is not worthwhile for them to make additional investment in the company

Capital appreciation

This is one of the foremost reasons for investing in equity capital of a company. Investing in equity capital at appropriate price levels can see your investment value jump significantly over a period of time. Capital appreciation is the reward for risk bearing and hence your wealth may see an upward movement over a period of time as the share price of stocks in your portfolio increases. This is by far the most important factor attracting people to invest in capital market.

Liquidity

Liquidity in the form of converting your investment into cash in times of need. This means that equity investment is one of the most liquid investments possible and you can safely invest therein, being fully rest assured that your investment is easily convertible into cash as and when you require converting it into cash.