Equity shares are one of the most popular strategies among traders because they offer considerable returns to the traders. Equity shares are launched for the public traders to generate capital for the expansion of the business. Multiple firms source a significant part of their capital from general traders.
In simple words, companies issued their equity shares for developing capital. These shares are issued by the company for the public traders and are irretrievable. While investors buy these shares, they are able to share profits, they have the right to vote, and they claim ownership of the assets of a firm.
Different types of equity shares are
Ordinary Shares
The intention of launching these shares in the market is to generate capital for bearing long-term expenses. Shareholders gain the right to be involved in the management and other company-related decisions. Investors who hold the most shares get significant voting rights.
Bonus shares
These kinds of shares are offered to the investors as an additional stake while the firm is developing profits. Although bonus shares never raise the total market cap value of the firm.
Rights shares
These shares are issued by the firm to specific investors at less cost, which grows the stake in a specific business. The company provides shares to rights holders for a particular time duration until the business state generates sufficient profits for fulfilling the company’s expenditures.
Preference equity shares
Preference equity shares are launched in the market as a guarantee of providing cumulative dividends before profits are spread between ordinary shares holders. Holders of preferred equity shares do consist of fewer voting rights. If the shareholders consist of capacity, they can earn by the stipulated amount of profits along with bonus returns. But if they are considered as non-participating equity shares, they can’t take benefits of such profits.
Characteristics of Equity Shares
Permanent in nature
Equity shares offered by the company are non-refundable and permanent in nature. Investors can’t return these shares before the company decides to shut down its business.
Potentially high returns
Equity shares consist of high-risk features and are volatile in nature. Therefore returns provided against these shares are enormous. So, if you are ready to bear more significant risk, then you can also generate huge profits from equity shares.
Dividend payments and Transferable
These are transferable, which means investors can transfer these shares ownership to the other investor, or any investors can also get ownership from shareholders. Various companies provide dividend payments to their shareholders. The dividend amount is based on the profits generated by the firm and the availability of money at the company’s account. Must note that whenever a firm is unable to generate profits, it will stop the dividend payments.
Advantages of investing in Equity shares
More risks, high rewards
As we mentioned before, equity shares consist of high-risk factors. Equity share investing offers more risk and more significant profit to the investors. In the case of equity shares, while the company generates profit, shareholders also get benefits via dividends offered by the company.
Easy and efficient
Traders can invest in the equity market through the finance platform and stockbrokers. Some of the top online stock brokers are Primefin and 101investing. Traders can buy equities of any company as per their choice through a live account.
Diversity
Traders can develop a diversified portfolio by investing in all the equities of the company from multiple industries and sectors. Diversification provides you exposure to equities of various industries and generates a diverse portfolio that provides a constant return in the future.
