Buying shares in a company is the most common way to invest.
Historically, the returns on shares – also called stocks or equity – have outperformed most other asset classes, such as precious metals, bonds and stashing cash in bank accounts.
Shares are issued by companies as a way of raising money. Investors buy shares to provide the company with working capital to pay the bills or to fund expansion. In return, a successful company splits any profits earned from the shareholder’s investment by paying dividends on shares.
Although shares come with voting rights at the annual general meeting, in most cases, shareholders have little influence on the running of a company unless they hold the bulk of the equity.
Companies also issue shares in different classes and categories.
Ordinary and preference shares
Ordinary shares are the usual shares distributed by a company and the shares that give investors rights to dividends and voting. However, some companies issue A and B class shares that can have different levels of rights and dividends paid, so investors should understand what they are buying and what their rights are before purchasing.
Preference shares carry no voting rights but generally investors with these shares are paid ahead of ordinary shareholders.
Shares can be listed or unlisted.
A listed share is traded on a stock exchange, while an unlisted share is more likely to be issued by a small company or startup.
Listed shares can be bought or sold whenever the stock exchange is open, while unlisted shares may have no market at all.
Return on investment
Share performance is measured by return on investment or yield.
This return is paid in two ways, dividends and capital growth.
Dividends are generally paid twice a year and will