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What are Stocks and Shares?

Investing into stocks, or buying shares has always been a staple in an investment portfolio, and has more often than not given investors a much better chance of making their capital grow over a long period of time than other types of investments. Shares themselves, are what a company issues to raise money, when an investor buys those shares, they are effectively buying a portion of that company, and should that company be doing well, they have a chance to make a portion of the profits.

When you become a shareholder in a business, you would usually acquire certain voting rights when it comes to that companies decision, however in reality, only the very large shareholders have any actual effect on how the company is run, and what decisions are made. Shares are also known by a number of different terms, including securities, stocks, or equity investments.

The benefits of investing into stocks and shares

Shares have great potential as an investment vehicle, and can rise in value over time which enables you to usually sell them for more than you bought them for, with the difference in the buy and sell price known as your capital growth. Lets say for instance that you invested $10,000 into shares, and 4 months down the line you sell those same shares for $30,000 then your capital has experienced growth of $20,000, prior to capital gains tax, which varies in different countries. Not only can you make money from buying and selling shares, you can also make money through dividends. Certain companies when they make a profit, they may choose to distribute a portion of that profit back to its shareholders, which is commonly referred to as dividend payments.

Not all stock investments pay dividends, and companies are not obligated to do so, however if they decide to, standard procedure is to announce the size of the dividend with the companies full or half year financial reports. Most larger cap long established companies are more likely to be paying out dividends than smaller less established companies. It is important to note that in the same way as share growth, previous dividend payments from companies do not dictate the future payments.

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