If you have Rs.50,000 for investment purposes, would you invest in equity shares, preference shares, public deposits or debentures? Justify your answer.

Investment decisions are very subjective, as they differ from one individuals to the other. If a person is risk loving and he/she would want to reap in large amount of profits of the firm as well as have some share in its ownership, then he/she will invest this amount in Equity share. While, if he/she is not very risk loving and want to have a fixed rate of return along with ownership rights then, preference shares are a better option.

However, if the individual is very risk averse (person who prefers less risk) then, he or she can go for either debentures or public deposits. Both will entitle him/her to a fixed return. Also the time of repayment of both the return and principle will be fixed in case of debentures and public deposits.

So, we can say that the following factors will affect the individuals investment decision.

1. Whether he/she is risk loving or risk averse.

2. The rate of return (Dividend or Rate of interest)

3. Goodwill of the firm


 

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prefernce shares.

because these investors get special importance and are the ones who get sure return everytime. They get the dividend before all other share holders . These are cheap souce of finance.

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