This article, titled investing in shares (1), is aimed at preparing you to join the group of the rich. It is tuned to share knowledge about how to make capital begat capital in the capital market. Be patient enough to complete this 15 minutes course or less.
Capital is the fund out of which money is drawn to do all things in the process of production. It can be in the form of tangible or intangible assets. It has an economic unit that can exercise different degrees of control over it so as to make it substitute for any other factor of production.
A share is a portion out of the number of portions (or units, to use a more numerical term) into which the capital of a company is divided among those who subscribe to, and own the fund with which the company is carrying on its business activities. You may consult the dictionary for a more classical definition, but from the law's perspective, a share is further defined as the interest of a shareholder in a company, measured by the sum of money contributed into the company’s share (equity) capita;.
Investing in shares spreads risks because you can invest in as many types of companies, industries and sectors of the economy as you like. Though, any such investment remains forever unless you choose to dispose of it or any part thereof. Having shares, particularly in publicly quoted companies means you can be in business till the very last moment of your life. You can expand or contract it at will. You can also use it as collateral for a loan. You will be earning income as declared by each company in which you have shares. No matter what your starting capital looks like, your money will be growing with the economy.
BENEFITS OF INVESTING IN SHARES
Investing wisely in shares avails the investor the following opportunities;
Ø Investors can participate in governance of the company.
Ø Investor is entitled to all rights and benefits offered by the company e.g. bonus and right issues.
Ø Dividends may pose as a form of retirement benefit.
Ø With shares, you may convert your investment into an enhanced cash value as at and when acquired.
Ø Shares are useful as collateral security.
Ø It is a medium of savings for future conversion into project funds.
MEASUREMENTS OF THE QUALITY OF SHARES
The quality of a share is measured by the following factors;
o The earnings and the dividend yield.
o The dividend rate and the extent to which the dividend is covered by earnings of the company.
o The earnings per share.
o The current price-earnings ratio.
o The rate, steadiness or fluctuations in the growth of the company’s earnings in the past five years.
o The volume of trading and the percentage by which it increases or decreases over the past years.
o The type of investors who patronize the shares (institutional or petty investors)
All the above has to be worked out or researched into by the investor at the time of making a decision to buy, hold or sell. This is an area in which the stockbroker or other professional advisors are inevitably useful to the investor for proper interpretation and guidance. To learn more about when to buy or sell shares and/or what type of shares to deal with, visit our post investing in shares (2) or subscribe to our newsletter to get notified whenever we dropped a post.
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