Depending on the context and type of assets, the term ‘equity’ holds different meanings. But talking in a general sense, equity is the degree to which you own an asset after all the debts associated with that particular asset are paid off.
How do equity shares work?
Investing in equity share offers you the privilege to buy and hold a share in a company, gaining partial ownership of that company. So, when the company earns a profit, you generate income from the dividends and capital gains.
Investing in shares isn’t always upright! When the company faces a loss, it infers to your loss as well. Whilst, there are numerous benefits investing in equity shares offer you, executing an investment needs a little bit of knowledge in order to earn a profit.
Why should you invest in equity shares?
There are numerous reasons, why you should invest in equity. But below you’ll find top five reasons why people invest in equity shares despite it being a risky affair.
Increased capital gain and income
There is an increase in the profit the company generates when there is a rise in the share price of the company. Investing in the company’s shares helps you receive a return on investment in terms of capital income and dividends, which eventually hikes your source of income with the investment.
Limited liability of the shares
With investment in equity shares of a company, the liability of your shares is bounded to the extent of the investment made in a company. This highlights the concept of security in your investment. When the company incurs any loss above your investment, it has nothing to do with you, signifying the investor won’t bear that loss.
Ensures liquidity
The shares you buy in the stock market hold high liquidity value, meaning your shares can be easily transferred to a different owner. NSE and BSE on average record a high volume of transactions daily, signifying the number of buyers or sellers participating in the market at any given point of the day is high.
Exercise control
Investing in the share of a company gains you partial ownership of that company, which allows you to exercise control over buying, selling or holding shares whenever and for however long you prefer.
Right and bonus shares
Another important aspect of investing in shares is acquiring the ‘right shares’. Rights shares are issued to the investors when the company requires additional capital. Right shares being issued at a lower market price in comparison with the company’s shares allows investors to make a profit out of it and might even receive bonus shares from the company.
In addition to that, let’s bring to light the concept of ‘gainers’ in the share market. A gainer is a security that gains price or experiences an increase in price during the course of a single trading day. Basically, meaning the ‘star performer of a stock exchange’.
A BSE equity gainer is a share or stock that witnesses gain on the ground of the BSE index. BSE equity gainer thus experiences high liquidity due to big transaction volumes and is a generally preferred choice of traders in the market.
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