- Income stock An income stock is an equity security that pays regular, often steadily increasing dividends. This stock, also known as dividend yielding stock, usually distributes a higher divided in relation to its share price. From the stockholder’s perspective, higher dividend means more returns on investment, thus translating into more income.
- Growth stock A growth stock represents share of a company that is predicted to grow at a notably higher rate above the prevailing market rates. Most growth stocks do not pay dividends. The reason is that most of these companies prefer to reinvest their earnings for executing their daily business operations. These stocks usually help the company to grow at a faster rate.
Income stocks are generally offered by companies that have a track record of distributing dividends consistently. It is not mandatory that these firms are all high-growth companies. Often these stocks belong to companies in the real estate, energy and natural resources sector. Sometimes they are issued even by financial institutions and those belonging to the IT sector.
It’s important to note that the dividend from income stock is not taxable and hence, it’s ideal for investors with a low-risk appetite looking to remain invested for the long haul.
Growth stocks tend to be a little riskier because they don’t pay dividends. The only scope that the investor has is to earn money through capital gains during the sale of these shares. However, if the company does not perform well, investors might suffer losses. Companies which offer growth stocks are generally technology and biotech firms.
When you invest in growth stocks, you will notice certain common traits. Most of the firms issuing growth stocks will have unique product lines, for which they can hold patents. To stay ahead in the competition, they reinvest the profits to develop newer technologies to ensure growth in the long term.
Which one should you buy?Both income stocks and growth stocks have their own set of unique features. Both of them have their pros and cons which must be kept in mind before investing.
If you tend to be a risk-averse investor and want a stable source of income in the form of dividends, then buying income stocks from reputed companies is recommended. On the other hand, if you have a long-term financial plan and are willing to take more risks on your investment, then you can opt for growth stocks.
Click here to get started with your stock market investments.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
Tuition fee deduction under Section 80C of Income Tax Act
Educating a child can be an expensive proposition for most parents. As the cost of quality education is on the rise, the potential for saving money seems less likely. However, there are tax benefits that can be availed under the provisions of the Income Tax Act, 1961. Recurring expenses such as tuition fees is one such category that qualifies for tax relief, subject to certain terms and conditions.
6 Things you Should Know Before Buying Insurance Policy for Bike
Buying or renewing an insurance policy for your bike can often be overwhelming. Check out this short guide to know the factors you should consider while choosing the best insurance policy for your bike.
PPF Withdrawl: When & How to Withdraw PPF
PPF (Public Provident Fund) is a savings scheme, which is backed by the government on purpose to build a retirement corpus. As PPF is a long-term investment, it comes with a specified lock-in period. Read on to know about the maturity period and the withdrawal systems.
5 Types of Business Loan For Woman Entrepreneurs
There are now many different types of loans options in India for women wanting to explore their entrepreneurial dreams. Read this post to know 5 of the most popular options.