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What is Equity Trading? What are its benefits?

Equity Trading

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Today, most investors prefer trading over other investment options. It helps them reap higher profits and establish a Stock Market presence. It also empowers them to make significant financial moves.The most popular type that offers the desired benefits is Equity Trading. It primarily deals with the buying and selling of Equities in the market. These include company shares or stocks. Also, they can either be public stocks listed on the stock exchanges or privately traded stocks.

The following are some notable advantages investors gain through Equity Trading:

Higher profit potential

Equities typically have better profit potential. They fetch far better returns than other investment avenues. Plus, they have a broad profit margin, provided you stick with them for a long time. For instance, a Small-Cap Stock of Rs. 50 increases to lakhs of rupees if the company does good business. Hence, most investors opt for Equity Trade online.

Dividend income

A dividend is a portion of the company’s profits distributed amongst its shareholders. When traders invest in Equity Trading, they become acquainted with dividend income. Each time the company fairs well in the market, they receive such payment. However, the dividend income rate depends on which corporation the investor chooses. For example, if you invest in a company with excellent market potential, expect to receive consistent dividend income.

More control

You gain specific voting rights when you invest in a company’s share. This lets you exercise control and establish some ownership in the company. Besides, you can also participate in important related meetings.

Portfolio diversification

This enables investors to minimise their market risks considerably. It saves them from volatile fluctuations in the stock price. It also allows them to compensate for the underperformance of one sector with the outperformance of another. Thus, most investors opt for Equity Trading. It lets them diversify their investment portfolio effectively. When they open Demat Account online, they get access to their portfolio information. So, there is no room for confusion.

Bonus shares

At times, companies issue bonus shares to their shareholders. These are best described as dividends given away for free. They add to the overall profits of an investor significantly.For example, you buy 50 shares of a company trading at Rs. 1,000. If the company issues bonus shares in the ratio of 5:1, you receive five additional shares. This way, your investment value goes up because of the bonus shares.

Liquidity

The main benefit of Equity Trading is high liquidity. An investor sells the shares on the stock exchange and getsthe money instantly. This proves to be a boon, especially duringa financial crisis. It gives the investor the liberty to liquidate their invested capital quickly.

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