Advantages of Investment in Shares :
(1) Equity shareholders get income in the form of dividend. Companies offer attractive
dividend to shareholders even when the rate of dividend is flexible. Profitable and
stable companies offer good reward to their investors in the form of high rate of
(2) The liability of equity shareholders is limited only to the extent of their investment.
Naturally, the shareholder is not required to pay anything more than the face value of
the share purchased.
(3) Shares are easily transferable and this facilitates easy transfer of ownership at the
option of the shareholder (i.e. investor). This transfer facility (transferability) also
brings liquidity to the investment in shares.
(4) The equity shareholders get an opportunity to participate in the profitability of their
company in the course of time. The profitable companies issue bonus shares and
also rights shares from time to time. This gives benefit to shareholders. Even the new
shares issued by the company are first offered to existing shareholders. This preemptive
right enables existing shareholders to maintain their proportional ownership
in the additional equity share capital issued.
(5) Listed equity shares are actively quoted and traded on stock exchanges. This
marketability of equity shares brings liquidity to the investment in shares and also
convenience to investors.
(6) Equity shares carry tax benefit. At present, dividend on shares of Indian companies
has been made tax-free. However, the position may change as per the government
(7) Equity shareholders are the owners of their company with certain powers and voting
rights. This enables them (collectively) to exercise some control over the policies of
(8) Capital gain to the equity investor is possible in the case of shares as the prices of
shares fluctuate along with the future prospects of the company. Due to rise in the
share prices, there is capital appreciation and this offers extra benefit to the
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