SHARE

Who can benefit?

Individuals wishing 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 listed company that is publicly traded or an unlisted company. A listed stock is usually highly liquid, which means that there is a buyer at the market price. However, the price is volatile and goes up and down with market sentiment and the fortunes of the company.

The shares of an unlisted company are not very liquid. You need to find someone willing to buy your stock. 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 currency risk can be offset by currency hedging.

He typically owns an interest 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, since 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 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 administration 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 stock buybacks without professional advice. One way to get the advantage of stock exposure without the need for extensive experience is to invest through a mutual or managed fund.

If you want access to the entirety of a stock market or a sector within a stock market with minimal expense, 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 shares through a broker-dealer 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 the remaining principal after expenses have been paid. Diversification within a selection of other stocks and asset classes is the key to managing this risk.