UCtypes

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.

FD Vs Stock Market #002

Why is it important to grow money?

Well, people never knew the need to grow their money till a pandemic hit them, they got to know that their not only was their job unstable but also their financial status. Robert T Kiyosaki’s “Rich Dad Poor Dad” had a great impact on people too, people got to know to make their money work for them.

So, here comes the question, where to invest ,how much to invest and what are the different sources of investment? This blog post is a breif description of some of the most prominent sources of investment.

FDs or Fixed Deposits is the investment that your parents would have told you as the best form of investment ever, but is it true? Let’s find out.

Fixed Deposits as the name suggests means depositing a fixed amount of money which grows over time at a low interest rate. It is one of the safest forms of investment and is best suited for people with low risk appetite. The flaw in FDs is the low rate of interest, the interest rate is so low that Interest – Inflation gives absolutely nothing away. Take for example India, the average FD interest rate offered by Indian banks are 7-8% whereas the inflation rate in India is estimated to +-6%.

What is inflation? Well in lay man’s terms inflation is the rate at which the price of commodities increase(a detailed explaination of inflation will be provided in future blogs.), similarly, deflation is the rate at which price of commodities decrease.

Stock Market is an organised “market” where shares of companies are purchased and sold. When companies need funds,they issue shares of their company to the general public. Shares, as the name suggests means a share in the company’s profit and losses. Purchasing a share of a company makes you a part owner of the company. (Detailed explaination of how stock market works will be provided in future blogs.)

Is Stock Market a safe source of investment? The answer is, Yes,provided one has knowledge about the market, the companies and its internal and external environments.

FD Vs Stock Market

When it differentiated on the basis of safety, FD is way better than Stock Market. Stock Market always has the risk of crash, the market all over the world has hardly fully recovered after the 2008 crash, which ended up destroying families. (The 2008 crash, also led to the formation of “bitcoin”, which is a different topic altogether) In India, the famous stock market scams are “Harshad Mehta Scam”(to know more, watch “scam 1992” a great webseries on Harshad Mehta) and “Ketan Pareek Scam”. While talking about scams, one should never forget people like “Warren Buffett and Charles Munger” who are considered to be as the gods of investing. (Separate blogposts will be made dedicated to the lives of everyone who have made an impact in the current image of stock market)

On the basis of profit making, Share Market is way ahead of FD, if invested carefully. People end up getting atleast 12-14% return each year if invested in right shares( in some cases way more).

So, where should we invest? The answer is maybe both.

Day 1 13/08/21 #001

Well, this is the first day of blog posting which automatically makes me eligible for being the most unprofessional blogger ever, but I believe I’ll improve with time.

As the bio says, I am a newbie in the world of finance and with every passing day I want to learn about it and eventually become a knowledgeable person in this domain. If you are new too, lets try to learn and grow together.

I have a business background,my father is a businessman, my grandfather was one and I guess even my Great grandfather was a business man too, which makes sure that my family values money and since childhood I was taught the importance of money. Well, over the years I’ve understood one thing that no matter how much one earns, there is no satisfaction. But, on the flip side of the coin, without money,life doesn’t exist.

I have taken “Commerce” as the stream of studies after my tenth board exams, which introduced me to the world of finance and business, all the major sources of investing and how to get investment, boons and banes of different investment options etc.. The blogs that will follow will contain all the information about the subject that I possess, and all the information that I learn in the forthcoming days, business news, the trends in the money market, stock market,cryptocurrency and maybe even more.

This marks the end of my first blog, hope I’ll be consistent with it. The main purpose of writing blogs is to improve my knowledge about the subject, express what I feel and maybe improve my writing skills.

Thank you.❤