Share Market

A share can be summed up as a divided-up unit of the value of a company. These units are prone to fluctuation as they go up and down for various reasons. For example, if a company has a worth of $100 million which has a 50 million shares in issue, then each share comes down to $2 which are never stable.

In financial terms, share is a unit of account for various financial instruments including shares, mutual funds, limited partnerships etc. They are documents that are issued by a company entitling its holder to be one of the owners/ the owner of the respective company. They can be bought either via a personal meeting within the board of owners or by public listing. Once obtained, they sometime also get you voting rights of the company.

Shares have capital values which is also called the quoted price. It moves in line with the long term dividend payment. Dividends are the profits that are distributed to the shareholders in a company. They are primarily bought by investors in hope of benefiting from a rising flow of income over a period of time.

Shares are usually sold for a capital gain. The returns you earn are dividend plus the capital gains. However, you also face a risk of capital loss, in case you sell your shares for a lower price in comparison to your buying price.

To start trading in shares, you need a broker. There are high end and small sub-brokers to deal with every kind of investor. The general investors have to identify sub-brokers for regular trading in shares. Purchase and sale of shares occurs through the broker. The plans and deals are executed once they are transmitted to the main broker.

It’s also of utmost importance to understand that a company’s share price does not necessarily reflect on the company’s worth but what the investors think of it. There are companies that trade at a higher price than the ones that are actually worth that price. Share prices are totally affected by what’s in the market. Market news or forces and general investor prices are the two factors that make shares rise or fall.

On an average, shares have been quoted to give a 10% annual return on a long term basis even though it has a very unstable nature. Once invested in shares, they reap returns even if on price, through dividends.