Investors and shareholders are always willing to earn better ROI(Rate of Interest) over their investments and to make additional profits. Some stick to the traditional share market that the exchange boards regulate, while some resort to the flipside and profit more by investing in the unlisted share market. Investors buy unlisted shares to make additional profits and have a more extensive route to earn and grow their respective investments. The article deals with the prospective pros and cons of dealing with unlisted assets. But before getting to the advantages and disadvantages, let us briefly understand the concept of unlisted shares.
What Are Unlisted Shares?
The concept of an unlisted share market is not new in the field of stock trading. This unconventional way of investing in the company’s growth includes investing in the shares of the company that are not yet listed in the primary market (namely NSE and BSE in India). Unlike buying and selling shares in the primary market, trading in unlisted shares is either done by private transactions or by online trading platforms for buying and selling unlisted shares.
What Is The Risk Return Ratio, And Is It Worth Taking A Chance?
Now that you know about unlisted shares, it is necessary to measure the benefits and risks before you search for the best-unlisted share brokers near you. Even though the potential to generate profits is better in unlisted shares, there are higher risks associated with the investment. Here are a few pros and cons that one must consider before they plan to buy unlisted shares.
Benefits Of Investing In Unlisted Shares
Multiple benefits are associated with unlisted shares, making it a lucrative option for investors and stock buyers. Below are the reasons that make unlisted shares a preferable choice to generate better returns.
- Capitalising on the company’s growth beforehand
One of the best parts about investing in unlisted shares is the opportunity to earn significant profits with the growth of the company before it is listed in the public domain. If you choose the right company to invest in, there are better chances of good returns in the future. Investing in the unlisted shares of the right companies still not known in the primary market can prove to be an excellent long-term investment.
- A Good Option For Portfolio Diversification
Suppose you want to make a stable investment portfolio that can help you to minimise or mitigate the risk. In that case, you can always add a few unlisted shares to your portfolio to minimise the potential risks. The unlisted shares price is generally dictated by the common market rules, but the return opportunities in the unlisted domain have a better potential for profit generation.
- Betting On Undervalued Shares
Some companies that are a part of the unlisted shares list are undervalued. If the investor understands the growth potential and buy unlisted shares of the company, there are chances of multiple returns in the future. To analyse and find such shares, it is essential to have a good knowledge of the market. Otherwise, you can always use trading platforms that provide expert advice to invest in unlisted shares.
The Downside Of Investing In Unlisted Shares
Even though there are multiple growth opportunities associated with unlisted shares, risks are inevitable. So, before starting your investing journey in unlisted shares, you must also have an idea of the disadvantages associated with the investment in unlisted shares.
- Difficult To Liquidate
Unlisted shares are not the best investment option if you want to encash them on short notice. Unlike the listed shares, the unlisted market is not governed by an exchange board; the market is characterised by a lack of liquidity. So in case you want an easily cashable asset, you might want to abstain from investing in unlisted shares.
- A Lack Of Worthwhile Information
There is a lack of information in the market related to the companies that float their shares in the unlisted market domain. So it becomes difficult to assess the status of the companies based on the details provided.
- Higher Uncertainty
With higher returns comes higher risks. Any central authority does not supervise the unlisted share market and is hence prone to more risks. Not only this, but the companies in their early stages of development are also prone to more fluctuations and risks.
Before Investing In Unlisted Shares
The risk-return calculation is an essential step before you plan to buy unlisted shares. If you are a beginner, it is better to take advice from experts in the field.iMoreover, seasoned investors should opt for a platform that provides an extensive unlisted shares list to choose from. Stockify is one of the best trading platforms that deal with unlisted shares and is a one-stop shop for experts and beginners who want to try unlisted stock trading. Head over to their website and start trading.