Advantages and Disadvantages of Investment In Equity Shares

Advantages of Investment in Equity Shares

1. High return on investment: When market price of shares increases the value of shares also increases. Also in times of prosperity, the equity shareholder gets high rate of dividend by company.

2. Voting rights: Equity shareholders get voting right on companies policy matter.

3. Right on new shares: Under the provisions of the companies act, the existing shareholders has right to allotment of newly issued shares.

4. Many rights at company. Equity shareholders have many rights in company. E.g. They can vote at meeting, elect director, look into the books and records of the company, transfer or sell their shareholdings.


Disadvantages of Investment in Equity Shares


1. High risk on Investment: Price of shares depend on companies performance and profits. If earning capacity of companies decline then rate of shares also declined.

2. Poor Economy: If the economy of particular sector or country is poor then price of shares decline heavily.

3. Manipulation: Declaration of dividend is solely depend on companies decision.If company decides to give dividend at the time of profit then only shareholder get dividend otherwise it is not fixed.

4. Unhealthy Speculation: During period of boom or recession it is difficult to predict future of shares.