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## Introduction to Financial Market 1. **Tax Advantages:** Any equity investor does not have to pay tax on long-term capital gain made either through direct equity investments or through equity mutual funds. 2. **Potential to beat inflation:** Equity investment has the potential to beat inflation...

## Introduction to Financial Market 1. **Tax Advantages:** Any equity investor does not have to pay tax on long-term capital gain made either through direct equity investments or through equity mutual funds. 2. **Potential to beat inflation:** Equity investment has the potential to beat inflation and give stupendous return. The sensex has returned 16% CAGR since last 30 years and ₹5,000 invested every month would have become ₹3 crore today. 3. **Right to Bonus and Right Share:** Only equity shareholders are eligible for bonus shares and right shares. The shareholders are also eligible for stock splits and other corporate benefits. 4. **Convenient Way to Invest:** Equity shares are mostly of lower denomination and people with limited resources can purchase these shares unlike in the case of gold or real estate, which are high-ticket investment options. 5. **Liquidity:** The shares of the company which are listed on stock exchanges have the benefit of anytime liquidity. The shares can very easily transfer ownership. ## Preference Shares Preference shares are those shares which enjoy preference over equity share capital. The two main preferences are: * **Fixed annual dividends:** * **Return of capital in the event of winding up of the company:** Although, the preference shareholders enjoy the above preferences, they do not enjoy normal voting rights. They are entitled to vote only on those matters that affect their interests. The maximum rate of dividend permissible is 14 percent per year. ## Features of Preference Shares The following are the features of preference shares: 1. **Preference for Dividend:** The preference shareholder enjoys a preference for dividend. They enjoy a preference for dividend over the equity shareholders.