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What Are Unlisted Securities? Is It Good For Investment?
Unlisted securities are a financial instrument that does not fulfil the criteria for listing on a formal stock exchange. Unlisted securities are traded on the over-the-counter (OTC) market and are referred to as OTC securities. On the OTC market, market makers, also known as dealers, make it easier to acquire and sell unlisted securities. In simple words, Unlisted securities are the shares that are not listed on the stock market because they don't fulfil the listing criteria.
Financial Instruments That Aren't Listed
The common stock is the most prevalent sort of unlisted financial asset. The majority of these unlisted equities are traded on the over-the-counter (OTC) marketplaces. There are also the following instruments:
- Stocks worth a penny
- Bonds issued by corporations
- Securities issued by the government
- Derivative products like swaps, etc.
How Do You Invest In Unlisted Securities?
There are a number of ways to invest in unlisted securities. Below are some of the tools through which you can invest in Unlisted Securities.
Intermediaries and Start-ups
A firm that is in the pre-IPO stage is currently unlisted but plans to list in the future. You may invest in pre-IPO firms since the shares are sent straight to your Demat account, even if the deal is off-record and the exchange is not involved. Alternatively, you might invest in unlisted start-ups with the potential to expand several times in the future. These businesses may be off the radar right now, but they have the potential to provide earnings and development in the future.
Direct Stock Purchase from the promoters
You can approach a reputable wealth manager, investment bank, or broker to discover how to determine the share price of an unlisted firm if you want to invest a large amount of money in the company. They will also assist you in making direct contact with the company's proprietors and provide you with a list of unlisted firms in India. This buying is called private placements.
Invest in PMS and AIF schemes that picks
To optimise the investors' net returns, the portfolio manager constantly alters the portfolio's weight and composition based on market developments. In India, you can profit from investing in unlisted securities through PMS programmes that include unlisted equities in their investment strategy.
Should You Invest In Unlisted Securities?
- Only surplus funds should be invested in unlisted firms by a retail investor. If you have money left over after completing your financial goals, you should only invest in unlisted equities. It should not bother you if you lose this money.
- You must be aware of your risk profile. Because the commission rates are so large, many middlemen are pushing these private assets.
- So, in consultation with your investment advisor, make educated selections based on an extensive due investigation.
