Investment in shares offers a great way to maximise the potential of your savings. This way, you can effectively save for your short-term needs or build a corpus for your long-term goals.
If you are new to investing, you must be wondering, “Why invest in the stock market” at all? Read on to know the answer, the risks of investing in shares and other details.
Shares are basically miniature snippets of a company. By owning a share, you own a tiny segment of the company and also a proportion of the company’s value. Shares are great for long-term investments since they usually surpass government and corporate bonds and other such avenues.
There are risks associated, but in the longer term, you get rewarded with benefits.
You can choose to purchase shares, or you can invest in mutual funds. Funds essentially buy a set of shares that a fund manager monitors and administers.
One of the most significant benefits of investments in shares is that when you own a share, you become a company shareholder. This can mean you have certain rights over the decision-making in the company.
So essentially, if you have a share with a company, then over the years, the investment value of it increases with the company’s progress and profit making.
Also, certain shares allow you to reap the benefits together with the company. This means that the profit gets shared with you as dividends.
Also Read: Know About Investing in Mutual Funds
In the case of fully established and renowned organisations, you get profits as dividends. However, the progress is not a very fast process. These dividends can provide a regular source of income and you can even invest it for further monetary gains. However, remember that the income from dividends is taxable.
For smaller organisations, there are usually no dividends. However, the growth is better there. If you wish to sell the shares for that company, it doesn’t come easy. It is hard to find buyers because of the lesser credibility of the company. Analysing the growth of the company and predicting it accurately is also critical.
Big organisations like Infosys have a lot of happy employees owing to their shares in the company. Here, the drivers, plumbers and attendants are all millionaires. In today’s date, around 100 individuals in Infosys are billionaires and around 2,000 of them are millionaires.
The management has a habit of rewarding its employees over the years for their dedication and hard work. With the progressing organisation, the value of shares and the benefits for shareholders (including the drivers, attendants, etc.) increased manifolds.
The economic conditions of the company and its surroundings determine the boom or downfall of shares. If the share value decreases, then the importance of your investment also fades away.
Holding shares in just one organisation is also very risky. You should spread the risk by owning shares in multiple organisations. Diversity plays a significant role here.
This is because if you own shares in only one company and it drastically witnesses a degradation in its value, then you are at risk of losing all your money. Also, diversifying helps you earn better returns with more stability.
If you intend on purchasing or selling shares, then it is advisable to consult a traditional stockbroker. You can also consult an online broker or a financial adviser. A financial advisor can guide you well on what to buy and sell.
While investing in the stock market is a great way to grow your finances, you must have a sizeable amount beforehand to buy shares. So, to get the required finances, you can take an Instant Personal Loan of up to ₹5 lakhs from Fibe.
Download the Personal Loan App or register on our website to get started.
Investing in shares is a great way to generate wealth and achieve financial goals. However, you must also consider the risk factors and take necessary precautions to reduce them.
The answer on how to invest in shares is simple. Here are the steps you need to take:
