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What are Stocks and Shares?
What are stocks and shares? If you’re looking for a different way to make money, why not consider investing in shares? This involves investing your money into a company rather than placing it into a savings account and accruing interest.
Stocks and Shares explained
So what exactly are stocks and shares?
“Stock” is defined as “the capital raised by a company, usually a PLC, through the issuing of shares.” (Google dictionary). The shares are issued to the investors first and sometimes to the public. A recent example of this is Standard Life after their decision to demutalise. This “stock” is purchased by individuals or companies who then become shareholders. A certificate is issued to the shareholder stating the amount the share (s) is worth. The shareholders then become part-owners of the company and receive dividends (payment of money).
The Stock Exchange
The amount of money received in dividends will depend on how well the company performs in the market. The market-place for shares is called the Stock Exchange. This is where all the main financial centres trade (NYSE, Hang Sang, and LSE etc). These exchanges have a centralised system and operate by strict rules and regulations.
What’s the risk?
There are many risks associated with investing in shares. Any number of factors could affect a company’s performance causing the share price to drop. Depending on how much is invested, the value of the dividend could dramatically decrease. It’s a good idea to devise an investment strategy or consult a specialist broker before you decide to invest.
Links
General advice on the market and glossary
www.moneyextra.com/stocks/
Guide to stocks and shares (USA)
money.howstuffworks.com/stock.htm
The London Stock Exchange
www.londonstockexchange.com/en-gb/home.htm
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