Investing uncovered: What owning shares is all about

Julie Brownlee, Fsp Invest, 26 Mar. 2014

Tags: shares, owning shares, what is a share, investing, companies, selling shares, why buy shares,

When you think about investing, one of the first things that comes to mind is buying and selling shares. But have you given any thought to what a share is? And why do companies sell shares in their businesses? Let’s take a closer look at what shares are all about…

Why companies sell shares

Companies sell shares in their businesses to raise money, John Stepek in Money Week explains. Of course, they can do this by borrowing money from the bank and by other means, but selling shares has its advantages over these other methods.

One of the main advantages of selling shares is that the company has no obligation to repay that money back to the shareholder. The company also doesn’t have to pay interest as it would it if took out a loan.

So if you decide to buy shares, you take the chance that the company could go bust, rendering your shares useless.

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The advantages of owning shares

But of course, there are plusses to owning shares, otherwise nobody would buy them.

When you buy shares, you hope that the company you invest in is going to flourish over time. This means that’s you’ll benefit from a rising share price and possible dividend payments too.

What owning shares really means

By buying shares, you’re buying a small piece of a company. It really is as simple as that. You own a stake in that business.

For example, if you own Sasol shares, you own a bit of Sasol.

And the main driving factor behind owning shares is the hope that you’ll share in the company’s profits.

So there you have it, what owning shares is all about.

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