Advantages & Disadvantages of Stock Investment
by Mansi Dandekar Financial Blogger
Advantages Of Stock Investment
Of course, the benefits will be obtained by both parties. Where the company will get the injection of funds worth the needed, as well as a promotional event for the company and its products.
While the advantage to the investor as an investor is that the shares purchased are a voting right that will determine the future. So that capital holders can continue to participate by giving their voting rights to the progress of the company so that the shares they buy will have a higher value. From this value difference, the shareholders can then sell their shares and benefit from the price difference. Moreover, in general, when the IPO was first performed, the price of a stock would be very cheap.
- Dividend: In the case of Stock Investments, Dividends can be interpreted as a division of company profits to legitimate shareholders. The greater the profit of a company that you invest in there, the greater the Return that you will get as a legitimate shareholder.
But, of course, not all profits are then distributed entirely to shareholders. There are numbers of profit percentages that will be retained and reinvested, or used as operating expenses and company development in the future. Decisions of Dividends here will usually be made through GMS negotiations (General Meeting of Shareholders).
Of course, Dividend rules are not the same between one company and another company. There are even companies that do not apply Dividends and instead apply the concept of Capital Gain as a means of sharing profits.
- Capital Gain: Some companies apply the concept of Capital Gain. That is, for each share that we hold will be added value as the difference from the initial value of purchase, and later at the time of sales value. So, profits here will be determined by how much and how much shares we hold in the company concerned.
The disadvantage of Stock Investment
The weakness of stock investment is just the opposite of some of the benefits of stock investment, namely:
- No Dividend: If the company in which we hold some shares does not apply the policy of dividends or profit-sharing. Of course, the opportunity for the benefits that can be obtained is very minimal
- Capital Loss: Capital Loss here is the opposite of Capital Gain, where the stock that we hold decreases in value. So, if we sell these shares, the loss in price difference multiplied by the number of shares we have will occur.
- Corporate Bankruptcy: In this case, it is clear that this is the risk most concerned by every investor. If the company goes bankrupt, of course, there will be no refunds that we have invested in the company.
Stock Market is a very fluctuating market and risky therefore the loss and profit happen many times. To reduce this you can take help from investment books, Stock Market Advice and business news
Created on Aug 2nd 2019 08:49. Viewed 66 times.