2.2 Advantages,Disadvantages of Stocks,Indices

Let us now take a look at the advantages and disadvantages of trading of the Equities and Indices


  1. The rate of return of investment massively beat the bank rates. For the UK, in the current point of time of making this video, it is 0.75%. You can get a much greater yield in your investment with stocks, if you know what you're doing, as compared to the bank rates.

  2. You have to remember that you are Buying an Asset. It is safe. It is almost like buying a house for example. When you buy a house, they are in physical bricks and mortars which makes it a safe investment.

  3. This is much better in terms of dividend yield. The dividend yield that you get from buying a stock varies from stock to stock. On that dividend yield, you pay less than or for UK, a 0% UK tax


  1. The first disadvantage that we can think of immediately is the Leverage and Margin. Since these are leverage and margin products, you have to have enough margin to buy stocks. Specifically for stocks, you will need a much greater amount of capital invested because the leverage tends to be less for stock. Especially for CFD, which is a type of vehicle that you can use to trade and the leverage and margin is a lot less.

  2. Volatility is another big one. There are a lot more gaps that takes place in stocks If you're trading short term and you have stop in place, there's a high chance that you will get gapped above your stop, which would not be ideal. That is because of the gaps that occur.

  3. Insider trading, which is relevant particularly for the equities. There are so many different types of insider trading. Based on our research, it is amazing how many different types of insider trading there are. However, the essence of it is that when someone finds some information and leaks it out to the public - This causes gaps in the stock prices to occur, which ties in with the previous disadvantage we spoke about. It is not ideal because they are small market which doesn't have much liquidity and they are prone to gaps in the market.


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