Investing in capital markets comes with a lot of benefits to the investors which include:
- Wealth Creation in the long term
Investors can create wealth in the long run by investing in the growth stocks to fulfil their financial goals. Wealth creation is becoming an art now a day that makes huge difference in your lifestyle ultimately. You daren’t to have your dream without proper financial planning. From housing to car, from education to marriage your dreams need to have long-term financial targets by utilizing every penny from now today. There are three simple steps to build long-term wealth: earn money, save money and invest money. To fulfill long-term financial goal, these three steps are mandatorily required by any individual investors or group of investors. The more the savings the more the investment and thus long-term wealth in result.
- Dividend income
investing in the cash cow companies’ shares yield regular cash streams in the form of dividends. Dividend income is an integral part of generating returns on investment in equities. Regular dividends allow investors to meet their regular cash needs. The companies having healthy balance sheet usually pay regular dividends if they don’t need of reinvestment through retained profits to fund positive NPV projects. The higher the dividend the higher the valuation of any company as per the dividend growth model commonly exercised by many analysts and fund managers worldwide. Dividend yield higher than inflation rate protects your money value and your purchasing power which makes you financially sound.
- Liquidity in times of exigencies
capital market is highly liquid since hundred years’ history. Liquidity is the heart of capital market which simulates long-term financing to contribute in the development of any country. Investors can have an exit when they need. In many cases investors require higher level of liquidity to meet any obligation or any pecuniary need. In case of long-lived tangible assets i.e. land or building don’t generally have the ability to convert into quick cash. But in case of securities market investors can enjoy the benefit of higher level of convertibility into cash.
- Tax benefits on the capital appreciation and dividend income
capital market provides tax concessions on investment which saves your tax bill every year. An investor’s tax file mentioning investment in listed securities have the merit to the tax authority to avail certain level of tax rebates. Saving taxes out of capital market investment is a very effective and popular strategy in personal finance since centuries.
- Mutual Funds
Investing in the mutual funds or the collective investment schemes is much helpful to create long-term wealth in the most diversified manner. Mutual funds pool scattered and small amount of money to a single platform. An efficient fund manager of any registered mutual fund helps investors to reach their financial destinations. In western world or even in India, mutual fund market is massive. There people invest in the mutual fund units from their early income age.s
- A better inflation hedge
The return on growth stocks usually beats inflation which enhances your purchasing power ultimately.Inflationary pressure typically ruins your financial freedom time by time. Fixed income securities have the negative real return feature in most cases. Investment in the growth companies relives your inflationary stress in the long-run. In some cases, the returns generated from high quality equities beat inflation by multiple times.
- Corporate control in the form of voting rights
Capital market is a platform where investors can have controlling stake in the listed companies. It is very difficult to find such way to get control on companies except the capital market.The voting rights out of corporate controlling stakes allow the investors to trigger influence on the company’s strategy and operations.