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Investments in stocks and shares can fit some strategies and goals. Here’s how they work:
- When you buy a share, you gain part ownership of that company.
- Hoding shares gives you the right to vote on certain issues facing the business. The day-to-day conduct of the company’s business is carried on by a board of directors, which is voted in by the shareholders.
- Any return you get from shares comes from share price growth or from dividends – payments out of the company’s profits. Returns from either profits or dividends aren’t guaranteed and you could get back less than you initially invested. You might get no dividends and the share price can fall.
- There are two main kinds of shares – ordinary and preference. Most shares are ordinary shares. Preference shares may give holders priority when it comes to payment of a level of dividends and on liquidation of the company, however they don’t usually carry voting rights.
- Preference shareholders usually receive fixed, regular dividend payments. However because the dividend is fixed, there is less potential for the share price to grow over the long term. Remember dividends aren’t guaranteed and share prices can fall as well as rise.
- By holding shares from companies in different industries and regions, you can create a diversified portfolio and aim to spread your risk, which might help you achieve smoother returns.
- If you’re unsure whether stocks and shares are right for you, you should seek independent financial advice. All investments can fall in value as well as rise and you could get back less than you initially invested.
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