Stock broking is a service which gives retail and institutional investors the opportunity to buy and sell equities.
Stock brokers will trade shares both on exchange and over-the-counter, dependent on where they can find the best price and liquidity. Stock exchanges place strict regulations on who can trade shares directly on their books, which is why most individual investors hoping to trade shares will do so via a stockbroker.
WHAT IS EQUITY?
Equity represents ownership in a company acquired through contribution of capital, which is required to set up or run a business. This capital is raised through issue of shares to the public or a group of private persons, where each share represents a proportion of the stake on the assets and profits of the company. These shares are either bought directly from the company through an offer, or traded (bought and sold) on the stock exchanges.
WHY INVEST IN EQUITY?
Despite the risk involved, investment in equities is known to offer investors high returns in the long run. Equities investment not only helps an individual in wealth creation over time, but also builds the nation’s capital in the process.
For the investor, equity offers numerous benefits such as:
- Entitlement to company’s profits:The holder of a company’s equity or shares is entitled to a share of profit in the company. This share of profit is received through dividends.
- Profit through value enhancement: A shareholder can also make profits by selling the shares on the stock exchange at a price higher than the purchase price.
- High Returns: Even though equity is a risky asset, returns on investments in equity are known to beat inflation in the long-term, and thus help in wealth creation.
- Tax Benefits: Investment in equities offers several tax benefits. For example, under the recently introduced Rajiv Gandhi Equity Savings Scheme, investment upto Rs. 50000/- in the equity of listed companies is tax deductible. Also, the dividend received by an investor through equity shares is exempt in the hands of the investor.
