There are many reasons why you should invest in equities, and it is not just about making money カヴァン・ チョクシ. There are many different reasons you should invest in equities, and the following article talks about those reasons.
Here are the top seven reasons:
- Equities offer a higher potential return than other investments
Investing in equities allows you to make money through capital growth. Capital is the amount that your investment has grown over time, and it will allow you to make money when your stock or shares increase in value. Of course, you can also receive dividends if the company you have invested in has made a profit, but this only represents a small percentage of your total return.
- Investing in equities can reduce your tax bill
In many cases, you will end up paying less tax if you invest in equities as opposed to investing in other types of investments such as property or bonds. This is because an investment in a company will give you a lower return rate than rental income. However, you are liable for capital gains tax when you invest in bonds or property. This does not apply to an investment in equities.
- When your shares increase in value, the tax will be deferred
If you make a profit when selling your shares, known as a capital gain, this is normally charged at 20%. This means that you will not have to pay the tax until you sell your shares. The tax becomes payable when you realize a gain.
- You can get more for your money with equities than other types of investments
For example, if you invest in property and then want to buy another home or investment but you do not have any equity, you will have to borrow the money. However, this will result in you having higher monthly repayments, and it can also increase your risk if interest rates go up. You can get more for your money with an investment in equities, particularly when stock prices fall. On the other hand, you cannot afford to buy at a discount with property investments.
- You will not get the same levels of diversification with other types of investments
This means that you are less likely to be affected by certain risks when investing in equities because they are traded on more than one market. This means that you can reduce your risk exposure considerably if more of your assets are invested in equities.
- Your investment will be safer with equities
With other forms of investment, your money can be at risk, and this depends on what you invest in and the type of asset you choose. For example, there is always a risk with a property investment because of fluctuations in rental prices. This means that you should not invest all of your money in one asset as the levels of exposure can be very high. However, with an investment in equities, your exposure is limited, and it will only be a small percentage of your wealth, which means that you cannot lose all of your money.
- You can easily diversify internationally when you invest in equities
This means that you can invest in a wide range of companies from different countries, and this will allow you to reduce your overall risk. With other types of investment, it can be difficult to diversify when you have a limited amount of money. Equities are also traded on more than one market, which means that you can access investments that would not be available if you only invested in certain markets.