Investing In Shares For Beginners

Written by imoney

Not sure what your friends are talking about when they go on about investing in share investments? It won’t sound like rocket science once we answer some frequently asked questions about share investments.

What it means to own shares?

A share, or share certificate, acts as a legal document certifying that a person owns a specific stake in a specific company. When you hold shares, no matter how small a percentage, in a company, you are considered a shareholder. This means you are at least a part owner of the company. This also entitles you to a share of the profits generated by the company even if you do not work at the company. Too good to be true?

How do you make money from share investment?

There are two possible routes for making money from share investments:

1) Profit in the form of distributed dividends: Companies may distribute a portion of profits generated as dividends to shareholders.

2) Profit in the form of capital gains: As companies grow, they become more valuable and so do their shares. If you were holding the company’s shares before their value increased, the prices of the company’s shares would have likely increased. The profit you make by “buying low and selling high” is known as a capital gain.

Is investing in shares a form of gambling?

Gambling is a zero-sum game. It redistributes money from the same pool, taking money from a loser and giving it to a winner. No value is created, just moved around. However, in share investmenting, you are buying into a real business, and its growth contributes to the overall wealth of an economy, Share trading can however be risky, and you could end up losing a lot of money especially if investments are made unwisely or without fully understanding the business one is buying into Be sure to seek professional advice before you embark on your share trading journey!

Ready To Trade Shares?

Before you can start buying and selling shares, you need to first have a share trading account. Check out our short guide on how you can start trading shares in 4 simple steps!