Advantages and Disadvantages of Share Market InvestingThere are plenty of investment options available today from shares, mutual funds to PPF, FDs/RDs etc but the investment option which has provided the highest returns in the long term are Shares. But high returns come with high risk. Hence before you invest your hard earned money in the share market, you should be aware of the advantages and disadvantages of share market investing. Typically, investors prefer to stay away from uncertainty and tend to panic when such situations arise. This panic then breeds mistakes and in a volatile market, mistakes can be easily translated to losses. Therefore, investors need to understand how to overcome the disadvantages of share market investing. Today, we will discuss the advantages and disadvantages of investing in the share market and how you can create wealth using the stock market. So, Let’s get started.
Advantages of Share Market Investment
- Probability of high returns over the short-term
- Ownership stake in the company.
- High liquidity
- Your rights are well protected by SEBI
- Tax benefits
- Long-term capital gains i.e. investments held for more than 12 months are taxed at 10% over Rs 1 Lakh only.
- Short-term capital gains i.e. investments held for less than 12 months are taxed at 15% + 3% cess.
- Any capital loss can be offset or carried forward for up to eight financial years.
Disadvantages of Share Market Investment
- Systematic risk
- Unsystematic risk
- Stockholders are paid last.
- Emotional Roller Coaster
How to make your share market investments less risky.
- Diversify your investment to reduce your risk according to:
- Investment types
- Different sectors
- Through mutual funds and SIP's
- Follow a staggered investment strategy.