Fruitful investment benefits are not reaped overnight. Hence, one should consider a long term investment plan while doing an equity investment. An equity investment refers to the buying and selling of stocks in the stock market. It is one of the best options to grow your wealth in long run. However, a notion exists in the minds of people that investing in equities involves a lot of risks.
In fact, long term equity investments are much safer than they are considered. Hence, it is imperative that a person should plan to invest in equities from his initial days. The benefits in equity investment include:
1. High Profit Potential in long term investment
While making an investment people generally pick the stocks of leading companies, as these are the best stocks to buy and in most cases sell them after a short period. However, one should keep in mind that a short term investment can go either way. Conversely, the long term investments are a safer option as they secure good returns.
A long term investor experiences both rise and fall of value of stocks. Hence, the cumulative results of such investments and timely decisions reap good returns.
2. Flexibility in investment
The stock market offers a diverse range of options. Hence, an investor is free to invest his funds in the stocks of one or more companies. Moreover, investing in stocks from multiple sectors prove to be beneficial because the fall in the value of one stock can be recovered from the rise in value of another stock price.
3. Tax advantages
Moreover, an investor gets a tax-exempt advantage when he invests in equity. The long term equity gains are tax free if held up to 12 months or more. Further Long term equity investors also enjoy the benefits of rupee cost averaging thus enabling them to buy stocks even when the market is facing a downward trajectory. No such benefits are enjoyed by short term equity investors.
Liquidity means the ease with which the assets can be converted into cash. The stocks have high liquidity as the owner can sell the stocks whenever he wants. Moreover, selling the stocks has little bearing on its value. Furthermore, stocks do not have any lock in period which aids the quick selling process. Lock-in period refers to the defined time period before which a stock holder cannot sell his stocks.
Hence, long term investments in equity market are highly profitable, if you know where to invest, when to invest and how much to invest in a particular stock. Moreover, one should prefer to invest in both blue chip companies and in companies, which have high potential and are slowly making their way to the top.
Neither does everyone has the knowledge of stocks nor do they have the time to delve into research. Therefore, you can take help of an advisory firm, which with the help of their smart algorithms and expert advice guide you about the best stocks to buy.