An unlisted share is a security that’s issued by a foreign issuer, on which there is no quotation and public quotation, and is thus traded in a special market. It’s a way for companies that want to raise money in the open market to do so.This is in contrast to common shares that are traded on formal stock exchanges, which allow companies to sell securities to a buyer willing to exchange the investment for cash. Moreover, tax benefits are the same for every investor as there are no particular advantages for buying unlisted shares.In addition to stock risks, the risk of buying unlisted shares is also high. There are some risks that you must take into consideration when investing in unlisted shares.Thus below are some tips on how to buy unlisted shares.
- Investing in start-ups and intermediaries-In general, small companies trading in the OTC securities market offer more lucrative returns than larger, established companies. Investors generally feel more confident investing in unlisted shares since these are less correlated to any overall market moves. Some unlisted shares also offer significant benefits to unlisted investors including limited liability protection and the opportunity to take direct ownership of the company. Tax-wise, unlisted shares are still treated as debt since their value isn’t backed by tangible assets. Therefore, investors will still have to pay income tax.
- Buying stocks directly from promoters- However, there are also unlisted stock investment products that can be bought directly from promoters of a company, as opposed to other OTC options. The terms are a bit nebulous and may refer to some combination of a complex form of financing in which an investment company takes a fixed percentage of the company’s outstanding shares or a royalty stream arrangement in which an individual or entity pays for the use of the brand name and other intellectual property of a company.
- Invest in PMS and AIF schemes that pick up unlisted shares- One of the best ways to invest in unlisted shares is through a scheme such as the Public Provident Fund (PPF). This is because PPF is regulated by the Securities and Exchange Board of India (SEBI), which ensures that these investments will not suffer undue risks. However, you can also buy unlisted shares through mutual funds or exchange-traded funds (ETFs).
- Buying ESOPs directly from employees- There are, however, situations in which an investor can buy an ESOP directly from an employee. In addition, some of these investments can offer various benefits to those that seek growth.Most ESOP investment options are liquid. In other words, they can be sold and acquired through the use of a brokerage account.
By focusing on investing, you can generate unique income streams and limit your dependency on the stock market. If you have not yet started investing in unlisted shares list, you are missing out on the fast-paced and exciting ride that investing can be.
The options you have are a lot more than those offered by stocks and funds, and with the right investment strategy, you will have the opportunity to generate both passive and active income for the rest of your life.
