SHARE
Who can benefit?
People who want to gain exposure to an asset that has the potential for capital growth (albeit volatile) and income.
What is?
A share is a unit of ownership in a company. It can be a publicly listed company or an unlisted company. A listed stock is usually very liquid, which means that there is a buyer at market price. However, the price is volatile and rises and falls with market sentiment and company fortunes.
The shares of an unlisted company are not very liquid. You need to find someone who wants to buy your share. It can be difficult to determine what a fair price is since shares are rarely traded and there is little public information.
You can buy shares of a domestic company or you can also buy shares of foreign or international companies. Buying shares in a foreign company is often done through mutual or managed funds. There is additional currency risk in buying shares abroad, although the currency risk can be offset by currency hedging.
He normally owns a share in a limited liability company, so he is not personally liable for the company’s debts, although he is at the bottom of the hierarchy if the company goes bankrupt, as other interest is paid, such as the tax office and creditors. first.
What are the benefits?
As a shareholder you receive the benefits of the capital gain in the value of the company, which you can realize with the sale of your shares. You also receive the dividends that are normally paid twice a year, as well as access to any rights, bonus shares and share repurchase plans that may be offered.
Other minor benefits are that you have the right to attend and vote at company general meetings, and you can sometimes participate in shareholder benefits, such as discounts on company products. If you own the shares directly and not through a managed or mutual fund, there are no management fees.
Some inconvenience?
It’s hard for the average investor to know when to buy the stock (good value?), when to sell, and when to take advantage of corporate actions like share buybacks without professional advice. One way to get the benefit of stock exposure without the need for extensive experience is to invest through a mutual or managed fund.
If you want to gain access to an entire stock market or a sector within a stock market with minimal outlay, an exchange-traded fund (ETF) is another option.
Direct stock record keeping can be difficult, especially if you reinvest dividends. There are software programs that help you keep records. If you trade or hold your stock through a broker or other management service, you may also receive the benefits of record keeping.
Remember that stocks are volatile investments and if the company goes bankrupt, you are the last to receive any remaining capital after expenses have been paid. Diversification within a selection of other stocks and asset classes is the key to managing this risk.
