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Why Equities are the New Gold?

09 August 20224 mins read by Angel One
Why Equities are the New Gold?
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With changing market trends investors are always on the lookout for more innovative, reliable and profitable options and equities have evolved as the new rulers of the financial kingdom. Equities are financial instruments that represent ownership in a company by the shareholders and are traded in the stock market. Combining the high return generating power of a non-financial instrument like gold and regular income generation as that in the case of a financial instrument, they turn out to be nothing less than a treat to the pockets of the investors. Considering their high potential for profit generation as well as high liquidity, it wouldn’t be an exaggeration to call them the new gold. There are many reasons as to why equities have been deemed as one of the most attractive options available to the investors.

High long term returns

Equities are a great long term investment option as the returns generated by them in a long time frame are significantly higher as compared to most other investment classes. Even though there are a few risks involved, but considering their high potential for substantial yield, investors can make a fortune by investing in them long term.

Tax benefits

While the dividends are tax free, the capital gains for periods more than one year are also not subject to taxation. The short-term(investments for less than an year) capital gains, though, are subject to taxation. However, taxes on the short-term investments can be saved by setting off the capital gains against any other short-term capital loss and also by carrying forward the capital loss. The government allows the carrying forward of loss for the next 8 years. So, the short-term capital loss of one year can be used to set off the short-term capital gain of another year. Investment in the equity linked saving scheme can minimise the tax on other incomes as well such as salary, business, etc. Such leniency in taxation rules, and the tax benefits offered, make equities an attractive option for the investors.

Reduction in risk and magnification of expected returns by diversification

As the saying goes, “Don’t put all your eggs in one basket”. So, diversification is a great option to reduce risks by investing in equities of multiple types rather than a bulk investment in just one type. Also the investors have the liberty to decide from a vast array of options. Investors can invest very small amounts of money if they wish(such option is not available with most other types of investments).

No Purity risks like commodity investments

Commodities like gold can generate high returns but gold’s purity is always a concern, which makes it a less reliable option. Equities on the other hand, being financial investments have no such risks involved.

Regular income generation

Equity investors may get regular payments in the form of dividends. Hence, besides the capital gain, the investor will also receive  small profits in the form of dividends, an option not present in physical gold investments.

Limited liability

Equity investors have limited liability. The worst case scenario for them would be to lose their investment, but they are not liable for any further liabilities, if the company they are invested in defaults. Hence, the equities come with no strings attached and are a reliable option for the investors.

No security risks of possession involved

Unlike physical assets such as gold, equities being financial in nature, do not involve any security or storage related risks during possession. Also there are no costs for storing and maintenance, unlike gold. Hence, equities are a hassle-free option for the investors.

The above mentioned points make it all the more obvious that equities are undoubtedly the new gold for the investors. They have the high return generating potential of gold minus the drawbacks. Though there are risks involved but there are also ways to cut it down and make investment in equities a profitable venture for the investors. With all other added benefits, equities are the order of the day in the investment world.

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