Question:medium
Read the following case and answer the question given below :
After reading an advertisement in the newspaper about an upcoming public issue of preference shares of a pharmaceutical company, Deepanshu made up his mind to invest money in that issue. Later on, he discussed his plan with his friend Chitkarsh, who is a stockbroker. Chitkarsh, on the contrary, advised him to invest in equity instead.
Give any three reasons to invest in equity and not in preference shares.
Read the following case and answer the question given below :
After reading an advertisement in the newspaper about an upcoming public issue of preference shares of a pharmaceutical company, Deepanshu made up his mind to invest money in that issue. Later on, he discussed his plan with his friend Chitkarsh, who is a stockbroker. Chitkarsh, on the contrary, advised him to invest in equity instead.
Give any three reasons to invest in equity and not in preference shares.
After reading an advertisement in the newspaper about an upcoming public issue of preference shares of a pharmaceutical company, Deepanshu made up his mind to invest money in that issue. Later on, he discussed his plan with his friend Chitkarsh, who is a stockbroker. Chitkarsh, on the contrary, advised him to invest in equity instead.
Give any three reasons to invest in equity and not in preference shares.
Updated On: Jan 13, 2026
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Solution and Explanation
Equity shares generally surpass preference shares as investment choices due to these factors:
1. Superior Returns: Equity shares offer greater long-term return potential via dividends and capital growth. Preference shares yield fixed, typically lower, returns.
2. Ownership and Control: Equity holders are stakeholders with voting rights, influencing company decisions. Preference holders lack these privileges.
3. Growth Potential: Equity investments provide enhanced growth prospects linked to company profitability and share price increases. This makes equity suitable for risk-tolerant investors seeking substantial long-term gains.
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