Equity,Preference Shares & Debentures #003

In the last blog, a brief description about Fixed Deposit and Stock Market was provided, in this blog let us discuss the different ways to invest in a company.

All the common knowledge that people have about shares are about equity shares. Equity Shares makes you a partner of the company. Out of the three sources in the title, Equity Shares are the riskiest and yet has the highest potential of giving massive returns.

Preference Shares carry a percentage(%) along with them, the percentage is the amount of dividend that a company has to pay a preference shareholder. This is comparatively less risky and a company usually avoids issuing them. The rate of return other than the dividends is quite low.

Debentures are not really shares, these are loans given by the public to the companies. These are the safest form of investment with a fixed return. These are preferred by people with low risk appetite.

In case a company isn’t doing good and it is about to dissolve, first the debenture holders are paid, followed by preference shareholders and then equity share holders.

Equity Shareholders get tax relief on the investment profits, whereas tax is applied in the others. Equity Shares are perfect for people who believe in High Risk High Reward.