For newcomers to trading, the world of shares and the buzz of the stock market may seem intimidating. However, the stock market has the potential to provide a real return in your investment, not too often observed with cash savings. Contrary to cash investments, moreover, shares may plummet as well an appreciation in value. Therefore, the basics of trading is concerned with appraising yourself of stock and shares basics.
Defining a share
Shares is the most common term, though you frequently hear of equities and stocks as well. A share stands for part-ownership of a company. For example, when you own a share in a Public Limited Company or PLC, you have a share of the business. A share is a company’s portion that an investor could purchase. Shares have a monetary value. The implication is that they may be bought and sold.
When you buy a company’s share, you become a shareholder. It used to be the case that you were provided with a certificate as physical proof of share ownership. This, however, is it necessary anymore. Now, shares may be held electronically. PrimeFin service permits you to view and manage your account online in a manner akin to internet banking.
Being a shareholder affords you certain rights and benefits. A striking instance is the right to vote on company matters at the Annual General Meeting, and the potential advantage of obtaining dividend payments.
A dividend is a payment by the company to shareholders. It usually stands for a share of the profits. Companies are not obligated to pay a dividend. Many do so, however. It is worth bearing in mind that dividends and the value of shares can both appreciate and depreciate.
Stock market basics
The stock market is a marketplace for stock or share trading. The UK’s main exchange is the LSE or London Stock Exchange. You might be reminded of imagery involving lots of people shouting at each other, waving bits of paper on a congested trading floor. However, most trading processes are fully automated these days.
Market indices
To form a market index, company shares may be banded together. Then, their value is combined as a weighted average. Intuitively, the size of the company is directly proportional to its effect on the index’s value. Thus, companies of similar size and value are generally grouped together.
Frequently you hear of the market being up or down. Of course, that’s just the stock market indices rising and falling.
Contingent upon what industry or company size an index stands for, a market index value affords a good indication of market movements. Hence, it is a handy tool to describe the market. It also comes in handy while comparing the value of similar shares.
The explanation for share prices
Why do share prices move up and down? A share’s price is determined by demand and supply.
Demand for a share is mainly the number o people who would prefer buying and supply is the number who aim to sell. This will depend on the perspectives investors hold with regard to the company’s prospects.
Provided the outlook is improving, more people might prefer buying shares and the share price might appreciate. However, in case a company’s prospects are less hopeful, folk might consider selling shares, leading to the price decline.
Stocks basics: stockbrokers’ three levels of service
Execution only
A DIY investing form, execution-only, involves investors making their own investment decisions and placing instructions with a broker who then executes them.
Advisory
An advisory service involves taking advice from a financial expert on the basis of the investor’s circumstances.
Discretionary management
Discretionary management implies leaving the investment to the experts. If you hve a large portfolio with limited time, this is the service you need.
Conclusion
When you are clear as to what shares are, how markets change, your choices and how to get started, all you need is to set up an account with Capixal and start investing.
