Investing in shares is one of the most common types of investing, along with cash, bonds, and property investments. However, investing in shares is different from the latter 3 investment types as a trader only owns a fraction of the asset they’re investing in. Essentially, shares allow a trader to own a portion of a company they want to invest in, resulting in them owning a proportion of the company’s value or net worth. As a trader, you can choose to own shares yourself, or invest in a collective investment fund which pools your money and others together for a variety of shares. These funds are managed by an account manager and take the responsibility of investing off your hands. Shares are bought and sold on the stock exchange. There are various stock exchanges that offer different shares, including small cap, medium cap, and large cap market exchanges.show more
For an investor to make money off investing in shares, they must purchase a number of shares in a company they believe is going to grow and become more valuable. If the company’s net worth increases, so does the value of your shares.
Another way to make money off investing in shares is to buy shares that pay dividends. Dividends are a portion of the companies profits each year, and can be paid out monthly, quarterly, or yearly. Shares that pay dividends are often large and established companies with not a lot of room for growth. Whereas shares with smaller companies who do not pay dividends have a greater chance of large growth, but are also riskier. Therefore, it is up to the investors risk level for how they want to invest.
You can also invest in shares by joining an investment fund. Investment funds allow an investor to profit from investing in numerous shares along with other people. These funds are managed by a fund manager, and the investor does not need to worry about anything.
Investing in shares has numerous advantages for both experienced and inexperienced investors. See a comprehensive list of the various advantages below.
An obvious advantage is the investment gains there are to be made. Generally, over time the stock market continues to increase in value, thus paying out gains in the shares you buy.
For shares that pay dividends, it’s a great way to make passive income, or to simply reinvest into buying more shares so that you can make more dividends.
Investing in shares is a good way to diversify your investment portfolio because there is such a wide range of companies you can invest in that are in no way related to one another, thus diversifying your portfolio.
When you invest in a company’s shares, you essentially own a portion of the company. This enables you to place votes on certain aspects of the company such as board members.