In the past few months, the share market has made headlines every morning. Investing in shares has emerged as the most popular way of generating long term wealth and fulfilling your financial goals. When you buy a share in a company, you’re effectively becoming a part owner of that company. As a shareholder, with an equity stake in that business, the investment return you earn depends on the success or failure of the company itself. Companies may pay dividends to shareholders or may prefer to reinvest profits for further growth.
Shares are units of equity ownership in a corporation. For some companies, shares exist as a financial asset providing for an equal distribution of any residual profits, if any are declared, in the form of dividends. Shareholders of a stock that pays no dividends do not participate in a distribution of profits. Instead, they anticipate participating in the growth of the stock price as company profits increase.
- Shares represent equity ownership in a corporation or financial asset, owned by investors who exchange capital in return for these units.
- Common shares enable voting rights and possible returns through price appreciation and dividends.
- Preferred shares do not offer price appreciation but can be redeemed at an attractive price and offer regular dividends.
- Most companies have shares, but only the shares of publicly traded companies are found on stock exchanges.
Benefits of investing in shares
- Part-ownership of a company
- Real-time dealing throughout the trading day with limit orders available when markets are closed
- Receive dividends either as income or re-invest to buy more shares