Many investors will invest in the stock market without knowing its benefit and risk involved in it, but market is always right to reward its investors whether long term or short term prospective. However investors may find painful times and joyful profits based on the market conditions and there investment strategy but we should know the benefits of investing in equity shares to understand its implications. The benefits of investing in equity shares (Listed) are:-
- Dividend is exempted from tax Under Section 10(34) of Income Tax Act.
- Long Term Gains is exempted from tax Under Section 10(38) of Income Tax Act (If shares are sold in recognized stock exchange).
- The holding period for calculating Long term Capital Gain is 12 months (other assets its 36 months).
- Short term capital gains is taxed at lower rates that is 15%
- Dividend is not constant but can vary as per profitability of company.
- High risk and return always follows.
- Easily cashable
- Capital appreciation is high compare to other assets class.
- Easy to gift and transfer by demat mode.
- Low transaction & carrying cost.
- Bonus issue by companies if good profitability. This will maximize wealth.
- Hedge against inflations.
The equity shares of listed companies are one of the best investment avenues that are present. It can give good returns when calculated for many years. There may be years when returns may be very bad like the year 2008. But new investor should invest in shares of listed companies in systematic approach without giving importance to volume / quantity but quality of shares purchased. For example if you desired to invest every month 3000/- it not big issue you can buy say 10 Dabur Ltd, 16 Lakshmi Vilas bank(LVB) etc. over period of 12 months you can accumulate over 120 Dabur & 200 LVB with benefit of bringing down cost of investment when market is falling otherwise book profit. But never feel bad of low volume / quantity but quality and invest on long term basis on SIP approach only.
