Personal Finance- Top Reasons for Owning Shares
Saturday, August 12, 2017, 6:00 AM | Leave Comment
Shares are growth assets that are linked to the profits of a company’s business.
They are an appealing option for investors due to the lucrative income opportunities they offer and exposure to numerous sectors and industries that facilitate diversity and growth in investment portfolios. Shares in companies entitle investors to ownership of the companies that they invest in.
Buying a part of the company’s capital makes you a shareholder in the assets and entitles you to a share of the profits.
Shares in listed companies can be traded in the stock market. This is done for various reasons that include making investments liquid, swapping for another company or product or realizing capital gains on sales of shares when market prices are higher then what was paid for products.
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Capital Gains
There are several benefits that are associated with owning shares and these make them worthwhile additions to an investment portfolio. One of the advantages of share investing is capital growth.
The opportunity for capital growth is a long-term goal of investing in shares. This happens when people experience considerable capital gains fro their shares when share prices increase. Some companies issue bonus shares as a way of sharing company profits and net worth increases.
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Dividends and Income
Company ownership entities people to ownership of profits after tax. This entitlement can be honored through dividends. Dividends that are issued by companies that earn their profits are attractive prospects for investors. Click here for Amcor.
Some companies use the dividend approach that involves reinvesting the dividends in the company. Shareholders are given more shares instead of paying out cash dividends. The tendency to opt for this approach is usually contained in the constitution of the company and discussed during annual meetings.
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Liquidity
Liquid shares are naturally liquid products that can be quickly bought and sold in the market instead of going through the tedious process of looking for transferees.
Brokers are also a cost-effective option to do the work for you. Trading on the exchange platform enables you to sell portions of your shares instead of redeeming the entire amount.
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Diversification
Financial products feature different characteristics and can be affected by various economic circumstances.
Diversifying products minimizes risk and maximizes return as well as being crucial for yielding a return on your investment that is close to your target.
Investing in the stock market is necessary for diversifying your portfolio. Diversification is a key strategy for managing investment risk and you can purchase shares directly through brokers.
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Incentives
Listed companies that range from financial services to the hospitality sector offer worthwhile discounts to their shareholders when they purchase products and services from them or subsidiaries. Qualifying for such benefits usually requires a minimum amount of shares.
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Control
Shares are attached to certain rights that include entitlement to voting rights for investors. The level of control you have is determined by the classification of the equity and six of shareholding. Ordinary shares are the main type of shares that are held by investors.
Ordinary shares typically limit investors to one vote for each share that entitles them to participate in electing the board. There are fewer rights for preference shareholders apart from dividends when they have first or prior claim.
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