Equity : A broad view as asset class
There are
many investment avenues available in the market like equity investment, fix
deposit, debt/ bonds, metal, arts etc. We can divide financial assets in 3
types. These asset types are equity, debt and gold. In this article we will
discuss about equity investment.
We are
often told that equity investments are subject to risk and in nature it is very
volatile. In simple terms, equity means the ownership, investor who own equity
in company participate in company’s growth like a promoter. If you hold equity
in a particular company, it means you become beneficial owner of that company.
As an equity shareholder, you also get the opportunity for the vote on
important business decision.
Advantage in equity investment:
Profit
making companies share their profit with shareholder as a dividend and it is totally
tax free as per the current law. Over a long period you can make a capital gain
through increase in share prices by investing in good companies. As per current
law, in our country long term capital gain in equity is nil. It has
outperformed in terms of return to other asset class over the long period. It
has ability to beat inflation and generate super return. It is very crucial
investment to achieve long term goal.
It has
greater liquidity compare with other assets. The transaction of shares happened
on exchanges and it is regulated by SEBI. Equity trading mechanism is very
transparent and no room for wrongdoing. Equity investment play very important
role in the economic growth of the country. It mobilize funds from public
towards various sector which is very crucial for country’s development.
Disadvantage in equity investment:
Return of
Investment in equity is not guaranteed. It depends on company’s performance. If
company is doing better, you will get higher return but if it is not doing good,
then you have risk to lost your capital also. In short run, it is very volatile
so it is very risky investment in short term investment point of view. If you
have invested in bad companies or enter when the prices are very high then you
can lost substantial amount of money.
Equity investment for whom and how
we can invest in it. We will discuss about this in
next article. For more detail and any other query related investment, you can
contact me through my email.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
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