One of the most popular asset classes you can invest in are shares, which are single units of ownership of the company. When investing in stock, you become an owner of a percentage of the company based on the number of shares you purchase.
What are the benefits of owning shares?
There are two possibilities to increase your wealth through shares:
You can either benefit from increase in price;
Or collect the dividends.
Thus, your potential lose is 100% of your money, because if the company goes out of business, an equity investor has last claim on assets, so you have a greater chance of losing your investment than if you were a bond holder.
But there are also a good news: your potential profit is not limited!
Assume you invested 1000$ in Apple the day it announced the first iPhone (January 2007), when stock price was $11.94. But after iPhone 3G was launched in July 2008, price jumped to 45.68 (282.5% increase), and your 1000$ became 3826$!
Pros and cons of holding a share.
1) Upside potential
As it were said before, your potential profit is not limited!
You can buy or sell shares anytime you want!
3) Open ended
You can hold your shares as long as company remains in business.4) Limited liability Liability of a shareholder or investor is limited to the extent of the investment made.
1) Risky and volatile
Shares can provide an investor with higher returns than bonds, and they’re also subject to greater losses.
2) Dividends are not consistent
The dividend which a shareholder receives is neither fixed nor controllable by him.
A stock exchange is an organization which hosts a market where different securities including shares are traded. For 2016 there were 60 major stock exchanges throughout the world with total market capitalization of about $70 trillion!
Steps to start A SHARE PORTFOLIO
- Of course, the very first requirement is money. You can invest any amount in the share market, but because of the buying costs, the more money you have to invest, the cheaper the brokerage fees.
- Next is finding a broker. Brokers work for firms that simply take your order and enter it in the market, or firms that take you on as a client and provide advice, research and financial planning to help with your investments.
- Decide whether you are a trader or a long term investor? Day trading takes a significant time commitment, while investing takes up much less time. Active investors may spend a couple hours per week researching and placing trades, but more passive investors may only need to commitment a couple hours every month or two.
- Now choose stocks and research the companies you want to invest in! What you buy depends on the return you’re hoping to make, what risks you’re willing to take and what is your investment horizon.
Investing in shares/equities or other financial instruments are considered as high risk. Above mentioned is not a recommendation to invest in those securities nor is it given any sort of advice or can be considered as complete information. Please seek for an expert advice.