Share market In a share market, shares are bought and sold. The stock market is a share market, however besides shares of companies, other instruments like bonds, mutual funds and derivative contracts too are traded in the stock market. People invest in shares with the objective of raising wealth – either through potential share price growth, via income paid as dividends or a combination of both. Capital growth Capital growth means that a share has increased in value however, shares can also lose value, so investors should carefully monitor the performance of their portfolios. Dividends A dividend is a payment by a company to its shareholders, usually as a share of profits. Some companies pay dividends regularly, others pay dividends sometimes or not at all. Some companies also allow you to reinvest dividends into new shares. Some investors can also receive tax benefits on dividends in the form of franking credits. Shareholder rights As a shareholder in a listed company, you will have the right to receive company information and to vote at annual meetings. You can also have the right to participate in some further share issues by the company, such as rights issues. Your rights may vary depending on the type of shares that you hold.
The share market (also referred to as a stock exchange) is a transparent and regulated marketplace in which shares in public companies are bought and sold. A share is a portion of ownership or equity that you have in a company. The value of your share depends on many factors - mainly how much money the company or asset earns, and the exchange rate at the time that you happen to be buying or selling. Once you own shares in a particular company, you can sell them to other investors on the share market. When you buy shares, you become a shareholder. This means that you own a percentage of that company, alongside other shareholders. What is a share portfolio? This refers to the collection of shares that you own at any given time. You can own multiple shares in multiple companies and across different industries. If the company that you have shares in makes a profit, and the directors of the company decide to do so, this profit (or a portion of it) may be divided among all shareholders as a payment, or dividend. This is paid according to the number of shares that you own. Some companies also have dividend reinvestment plans in place, where additional shares are issued to shareholders rather than paying out dividends in cash.
Capital growth The other main way of making money through shares is through share price growth if you sell your shares at a higher price than what you paid for them.
An advantage of shares is that they can be bought and sold very easily, and very quickly. You can usually sell shares and then access the cash in just a few time. This allows you to respond to any increase in the price of your shares quite quickly. Unlike property, there are no complicated legal processes and you can access your proceeds at settlement. Plus, unlike property, you can always sell a portion of your share if you need extra money.
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