Cash equities refers to the issuance of common stock/shares to the general public as well as institutional investors. It can be easily converted into cash (in T+2 settlement cycle) , that’s why they are referred to as cash equities.
It is a financial product which is traded in capital market. The Primary market issues fresh or new securities to the general public through IPO (Initial Public Offering) or FPO ( Further Public Offering). The secondary market also called aftermarket is the financial market where previously issued securities are bought and sold.
The major advantages of investing in cash equities.
- The shareholder becomes the part owner of the company.
- He gets the voting rights in important decisions of the company such as Restructuring, Mergers and Acquisitions, etc.
- He gets the dividend and capital appreciation.
- Also, the shareholder gets the flexibility to easily transfer his shares.
Disadvantages of investing in cash equities.
- The equity shareholders are given last preference at the time of liquidation of the company.
- There is uncertainty about the dividends.
- There can be capital depreciation.
- There can be difficulty in transferability of shares if there is some bad news about the company or the company has gone bankrupt.
So, one must have full and thorough knowledge about cash equities before investing in it.
Investment Banking 