Equity shares are ordinary shares, which represent a form of fraction or part of the ownership. In this case, a shareholder undertakes the maximum entrepreneur risks associated with the business venture.
To the investor, equity shares offer tax advantages in that, the larger the yields on equity shares results from an increase in capital gains or principal, which are taxed lower than other incomes in most of the countries.
Hedge against Inflation
Inflation is a major problem, but equity shares are a good windbreak against inflation although, it does not adequately compensate for the declining purchasing power because, equity shares are also subject to money-rate risk. On the other hand, when the interest rate is high, shares are less attractive, and prices tend to be depressed.
The good thing about equity shares is that the owner has full rights to transfer his/her interest to someone else. In essence, the buyer should ensure that the issuing corporation transfers the ownership of its book so that the new owner enjoys voting rights, dividends, and other privileges.
The individual will have full rights to the shares, yes, but, there will be little or no trading in the shares of many corporations because of lack, or there will be no interested buyers. It is for this reason that equity shares of many small businesses are difficult to market. They are simply nonliquid.
Growth in Share
Investing in equity shares has a plus to members enjoying an increase in the value of their shares because; they will share the growth of the company profits over a long period.
Equity share owners have general limited liability and especially in the corporate form of organizations. Equity shares are normally paid in full to the owners. Shareholders are not subject to the failures or on the part of the company in meeting their obligations.
Potential for Profit
In equity shares, the potential for profit is higher than any other investment security firm. The potential of capital gain is high despite the fact that the current dividend yield might be low. The total yields of your equity shares you have invested will be notable over a period.
Equity shares used to be known as ordinary shares, and the owners of these shares are real owners of the firm or company.