Profit Potential
Though you can get a low current interest rate, the profit potential is really higher in direct equity than any other investments.
When we invest in the direct equity shares of a company, we are, in legal terms, buying the ownership of the company. The total amount that a company plans to raise is divided into small fractions called shares, which have a value in rupees. By subscribing to these shares, we get a right to participate in company meetings and voice our opinion on decisions but the real reason why we invest is to earn a dividend – which is like a reward to us as an investor.
You not only get a huge profit potential to beat the inflation but also own a diversified investment portfolio. By choosing the right share at the right time, you own a part of the company.
It is important for an investor to select the right companies. This means selecting a company that offers good growth opportunities. A company that has strong business fundamentals has good stocks to buy for the long term. You get indirect benefits when the company makes any profit over time by way of an increase in your share’s value.
Buying and selling stocks at the right time is most important. That right time is when stocks are trading at undervalued price levels. In the short term, the stock market is driven by speculation. But in the long term, the company’s fundamentals overshadow speculative forces. It is advisable to buy when others are selling and sell when others are buying.
Though you can get a low current interest rate, the profit potential is really higher in direct equity than any other investments.
If you get a larger yield on equity shares from an increase in capital gains, the taxes are charged at lower rates.
Shareholders of any company will get benefits as appreciation in the value of the investment and yearly dividends.
The main advantage of direct equity is its liquid nature which can be sold with ease in the capital market.
The equity shares offer an excellent hedge against the ever-increasing inflation and safeguard your purchasing power.
Shareholders of the company get the right to control the management of the organization in the way they want.