Stock Market And Its Benefits

Dilemma Exists as to Whether Investment is Gamble

Investment nowadays has been an attractive platform, especially in Equity market where increasingly investors are trying their luck. I have used the term Luck which simply indicates Gambling. In my opinion, Investment in Equity market isn't Pure Gambling. Pure Gambling involves various uncertain probability of Profit & Losses. Investment in Stock is not a pure form of gambling, as said and proved by the Warren Buffet. Today Buffet wouldn't be in this position if investing was a pure form of Gambling. However few things should be considered even "before applying your luck" and this consideration also proves the investment as not being a Gamble. To Earn and accumulate wealth in equity Investment one should have a perfect knowledge, vision, mission, objective and proper proactive strategy. If we apply probability, let's assume x% investors would be lucky enough to be what we call successfull but still there's only one Buffet in the game. A careful study of Business environment i.e both external and internal environment is very essential for investment purpose since market/ environment are not constant, they are dynamic. Market inhabits forces, influences, factors which are interacting with each other to create a new set of forces and those new forces may be favourable or unfavourable for a particular corporate. Ones gains result in others losses and this winning and losing streak continues forever. And hence a person that have a good vision and strategy can succeed and accumulate the loss of other. Though it is not necessary that ones loss might result in others gain every time, as right investment decision at favourable situation in a corporate might result in growth in the share price. Similarly a visionary man can make timely decision as when to enter or exit in the market.

Some benefits of investing in Stock markets:

Diversification:

It is always wise to create a Investment portfolio. Diversification is simply not putting all your eggs in one basket. If you make smaller investment in various different companies, the likelihood that one of your investments fails means that it won’t have a great effect on your total investment. If you have all your eggs spread between a number of baskets (investments), you are more insulated from any possible downturns. Because you can buy small parcels of shares , you can get greater diversification though investing in shares. Compare this to say property where a large sum of money is placed in just one investment. Hence an Investor has always an option to spend his hard earned cash among multiple stocks.

Tax benefits:

Investment in Shares involves associated cost, which is an item of expense of Profit and Loss account.Many of the costs associated with share trading are tax deductible, as you have to pay tax on your gains. Transaction fees, interest paid on margin loans and other costs associated with your investments can be deducted as an expense from your taxable income from the shares you’ve traded. Tax benefits can also come from franking credits (imputation credits) from shares. As companies have already pay tax on their profits investors receive franking credits on the dividends they receive.

Capital growth:

A well structured investment portfolio provides an opportunity to expand its investment in multiple industries.When reserves are paid out to shareholders in the form of extra shares is called capitalization of reserves. In other way, Capitalization of Reserves is the issue of shares by the company to its existing shareholders by capitalizing its revenue reserves. Share holders receive free shares in proportion to their ownership. For example, a free share issue of one-for-five means that each shareholder receives one free share for each five shares held. An investor who owns 100 shares before the free share issue receives 20 additional shares without cost. When the company issues free shares by doing capitalization of reserves the company`s stated capital and the total number of shares will be increased.

Similarly Other benefits could be Voting rights, Right Issue, Handsome holding period Return, Return in the Form of Dividend , Control over Affairs of Company etc.