Shares
Shares are one of the most common and popular financial instruments that are traded in the secondary market. A share represents a unit of ownership in a company and provides the shareholder with certain rights, such as the right to vote on important corporate decisions and the right to receive a share of the company’s profits in the form of dividends.
Here are some key pointers to help you understand shares:
Types of shares
- There are two main types of shares: common shares and preferred shares. Common shares are the most commonly traded and provide shareholders with voting rights and the opportunity to receive dividends. Preferred shares, on the other hand, generally do not have voting rights but provide shareholders with a fixed dividend payment.
Share prices
- The price of a share is determined by market forces of supply and demand, based on various factors such as the company’s financial performance, economic conditions, and investor sentiment. Share prices can fluctuate widely in response to changes in these factors, and investors need to monitor them closely.
Stock exchanges
- Shares are traded on stock exchanges, which provide a platform for buyers and sellers to come together and execute trades. The two major stock exchanges in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Brokerage firms
- Individual investors typically buy and sell shares through brokerage firms, which act as intermediaries between buyers and sellers. These firms charge a fee, known as brokerage, for their services.
Risks
- Investing in shares involves a certain level of risk, as share prices can be volatile and subject to sudden changes. However, over the long-term, shares have historically provided investors with higher returns than other asset classes such as bonds and cash.
In conclusion, shares are a popular investment option for those looking to participate in the financial markets. By understanding the key pointers mentioned above, investors can make informed decisions about investing in shares and potentially benefit from their potential long-term returns.
