Investing in Unlisted Stocks: Is it Profitable?

Are you a newbie in the world of the stock market and are pondering upon unlisted stocks? The concept is convenient to understand. Before concluding if investing in unlisted stocks is profitable, it is crucial to understand it’s meaning. 

Some companies and stocks are officially associated with either BSE or NSE, but some stocks aren’t. But does that mean that you cannot invest in such stocks? The stocks that are not listed in the official stock exchange are the unlisted stocks. 

These stocks trade independently, and you can easily invest in them. The question here is, should you? 

Unlisted stocks: A Topper in the List or a Miss?

There have been a lot of questions regarding the authenticity of the investments made in the unlisted stock. Let’s make it easier by listing the advantages and disadvantages of the unlisted stocks. 

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Pros of Investing in Unlisted Stocks

Let us begin on a positive note and start by discussing the pros of investing in unlisted stocks. The popularity of the unlisted stocks has increased because many bi companies compete to touch the satisfactory mark of getting listed in the stock market. 

• The unlisted stocks are majorly associated with start-ups or small businesses. It is evident that small companies have a lower base, and therefore, they grow faster than the established companies. 

Investing in these companies in their pre-IPO phase can be very yielding for you as an investor. 

• The prices do not fluctuate a lot in the unlisted shares. This makes sure that you have a good night’s sleep at the end of the day without worrying about significant market price changes. 
• The unlisted stocks are either overvalued or undervalued. If you are lucky enough, you will have the advantage of buying it when undervalued and selling it when it has some significant value. 

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Cons of Investing in Unlisted Stocks

Just like a coin has two sides, similarly, investing in unlisted stocks also has some pitfalls. Let us now analyze the downside as well to understand the market more effectively. 

• If you are looking for cash in emergencies, then unlisted stocks can just drag you into more trouble. In the case of liquidity, they lack a great deal. They are hard to convert to cash and therefore not reliable in the eleventh hour. 
• If you own an unlisted stock, then you should be ready to pay higher taxes. The unlisted stocks demand a higher tax when compared to the listed stocks. 
• There is less transparency in the unlisted stocks. The reason for them being unable to provide exact news and current events to their users.
•  This does not let the investors stay up to date with the progress of the company they are associated with. This can also become the sole reason for the loss of a company. 

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The Final Verdict

So, now that we have taken a look at the advantages and disadvantages of investing in unlisted stocks, it’s time that we pick aside. 

It is always beneficial to invest in the company’s unlisted stocks you trust the most to be on a safer side. If you are not sure about the growth or anything about the company, then investing in unlisted stocks can go into vain. 

Imagine walking at the edge of a cliff and that too blindfolded. Risky and scary, isn’t it. The stock market is never free of risks, and it increases when you step into the zone you aren’t even aware of. 

The companies having the unlisted stocks are usually the ones taking baby steps towards progress. If you are patient and a long-term investor, the unlisted stocks can be a win-win situation for you. 

But if you are looking for some instant cash in times of distress, then you should, and you can never rely on the unlisted stocks. As we discussed earlier, it is difficult to liquidate them and turn the stocks into cash.

So, in all, investing in unlisted stocks depends on your situation and knowledge. If you don’t have a trusted advisor or company, you should refrain from entering the unlisted stocks maze. 

You cannot just jump into the game, assuming that it will turn into an IPO one day because it might never happen.  

Invest in an unlisted stock only when you have the time, patience, and trust to stick with a company through its entire process of progress. 

We hope that by now you have concluded, so happy investing!

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