Are you curious about where to get started with investing in shares? In a general statement, your understanding of the fact that investing in shares will help you keep pace with the factors of the economy that are usually responsible for dwarfing a nation’s currency is important. If you haven’t understood the concepts or precepts of investing in shares, you may refer to our introduction to shares article. Yep! We’re already into it. Let’s get started with what types of shares you should deal in.
There are high-priced and low-priced shares. Each has its advantages and disadvantages. The true fact is that a stock is low-priced does not make it inferior; though some shares are so low-priced that they attract themselves the degrading appellation of cent-cent shares. There are shares that attract good dividend measured by earnings per ratio. There are some with slow price movement compared with some that moves steadily up, while some yet, are fixed-legged. Some shares naturally attract the patronage of investors, not necessarily as a response to the tactical actions of the jobbers and brokers. For this purpose, some companies generously guide and keep to policies that affect the maintenance of the price for their shares. For examples, some companies, whatever the level of profit, or loss, always try to issue bonuses and/or dividend annually, provided they act within the orbit of the law forbidding the distribution of the capital of the economy.
An articulated investor, while selecting where to invest must have regard to age, the history, the type of existing shareholders, the management and the trend of the companies’ finances. These are usually considered with other factors localized or peculiar to the company in which the investor is interested. Below are illustrations to the peculiar factors to be considered.
· Liquidity
A company may post high profit but not well disposed to disburse cash for current dividend
· Access to capital market or other funds
Previous performance and maturity may pose as a pillar to help a company with easy accessibility to funds and this will provide flexibility to pay dividends.
· Legal restrictions
The distribution of dividends are regulated under company laws and in most cases, it is guided by provisions in the articles of association of respective companies.
· Existing obligations
A company may be under one current obligation or the other restricting it from executing its dividend policy as it may want. An example is where a company is under a loan agreement not to pay a certain level of dividend until it has reduced its debt/equity ratio to a certain level.
· Investment opportunities
An expanding company will normally finance upcoming investment opportunities with internal funds before considering the option of external finance. Investing in shares in such a company, it is imperative to ask, as a prospective investor, how the action of the management will affect the company’s dividend policy. How harmonious will the resultant position be in meeting the investor’s benefits objectives?
· The type of existing shareholders and their level of control
When a company has a large number of shareholders with variety of interests, a new investor in the company can only join and watch how the control swings. A core investor, under the privatization scheme of the government has the audacity to influence the policy of the company. Do your researches and analyze or ask before you act!
WHEN TO BUY OR SELL SHARES
It cannot be said with certainty of any share to be permanently healthy. When the price of a share falls, that is ill-health. Analysts go to work to find out why and the probability of recovering and when. If the share has received the appropriate attention with sound treatment, the price may consolidate and bounce back. Wise investor do not buy sick shares because one never know, the sickness may lead to death. But, as soon as the recession has been healed and the price is heading upward, it is time to buy. Caution however! When a recuperating share moves too fast and, sometimes beyond its traditional price range consider to dispose. The price surge may be an artificial arrangement. Also, when a share drops in price and it is a company in which you intend to hold for capital accumulation purposes, and your investigation assures you that the management is reliable, also that the identified factor(s) responsible for the sickness are temporary and remediable. Good shares are always on the move, sometimes backward, sometimes forward. The best ones move thus;
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