Stocks and Shares

Stocks and Shares

Stock shares are pretty much what the name implies-when you buy stock in a company you acquire a share in the ownership. If you are ready to invest in stocks as a beginner you first need to educate your self about how to choose stocks to buy, as well as the nuts and bolts of making stock transactions.

Buying stock is not like having a savings account in a bank where the money is insured; there is never a guarantee you will not lose money. Most people do make money-and far more than they would from the interest a bank pays-but risk is involved.

Making money from shares

The most common form of shares is ordinary shares. You can also buy preference shares, options and partly paid shares. There are a number of different types of shares such as ordinary or preference shares which have different properties.

For more experienced investors, derivatives such as options and warrants provide further diversification. However, when the majority of investors invest in shares, they buy ordinary shares. We invest in shares to make money either through a shares capital growth, i.e. the amount by which the share price increases in value over time, or through the dividends it pays to its shareholders. Dividends are payments made by companies to shareholders from their profits. Not all companies pay dividends. Dividends are usually paid twice a year and are in effect the yield from your investment. Some growth companies plough most of their profits back into generating more business rather than paying out dividends to investors.