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Investing in Equity

(Part 1 : The Benefits)

Hello future InCaner,
 

This article that I took the pain of writing is more or less for those of you who have always been interested in investing in the equity market, either through Mutual Funds or through the stock market but have not done it yet because either :

A. You don’t have enough information about the benefits of this kind of investment over the other kinds of investment

    (like fixed deposits, real estate etc) or,
B. You simply have no idea as to how you are supposed to do it.

And in this two part article i shall answer both your questions IN A VERY SIMPLIFIED MANNER.

THE BENEFITS

1. Capital Appreciation/ Capital gain : The potential to earn profit/capital returns is the greatest in equity investments. Let me     explain that with a scenario :
    You buy 1 share/unit at a price of Rs.100/- and after 2 years you sell that share/unit at a price of Rs.150/-. That means           your return in 2 years from your investment was 50%. Meaning an average return of 25% per year (return on a fixed               deposit is approximately 8% per year).

    That brings me to the next advantage.

2. Tax Benefits : If tax saving along with a compounded average annual return of 12%-14% is what you want then look no further. ELSS funds are equity mutual funds that help you get annual Income Tax deductions upto  Rs.1,50,000/-  while earning double digit returns in the long term. No other Investment instrument can help you achieve double digit returns while helping you save tax.         

3. Dividends : Dividends are essentially a company giving out a part of its profits to their shareholders. So along with your         capital appreciation you also get a share in their profits which also is TAX-FREE!!

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4. Liquidity : Equities are traded on major stock markets around the world. Equities and mutual Funds are highly liquid which means that they can be converted into cash quickly and with minimal impact to the price received. 

5. Diversification : Ever heard the saying “do not put all your eggs in one basket”. Well equity investments through mutual         funds or through stock market are the real life application of that saying. Your money is diversified in different stocks

    which minimizes your risks while at the same time increasing your chances of making a profit.

So above were the substantial benefits of investing in equities, although there is one catch.

Which is unless you are an extremely experienced and intelligent investor (in which case you wouldn’t have been reading this article) you should not, I repeat SHOULD NOT start investing without professional advice. Do not act on the advice of your friends, colleagues, relatives or even on the tips of your broker. That is for two reasons :

 

1. They seldom have any idea what they re talking about as they haven't studied the market as closely as professionals             (Financial advisors, wealth managers, Fund managers) have.

2. It is your hard earned money that you are investing and you deserve to get the best advice that you can for it. (just like           when you are sick you would go to a licensed doctor rather than treating your own self from the advice given by                     friends/relatives).

Financial Advisors provide you with an action plan and complete end to end advice for your investment so that you minimize your risks and earn optimum profits.

For more information on such services and to start your journey towards increasing your wealth contact InCAN Advisory

And for information as to what you need to start investing in equities read on to Part II.

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