A share is one of a finite number of equal portions in the capital of a company, mutual fund or limited partnership, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends and to a portion of the value of the company in case of liquidation. Dividends are not guaranteed. They may be increased if the company performs well, but they may also be reduced or eliminated if the company performs poorly.
So when you purchase shares, you become part owner of a company.As an owner,you
are usually entitled to voting rights on the board of directors and corporate policy.
Although past performance cannot guarantee future market results, Stocks,
historically have outperformed all other long-term financial assets. They are the only financial asset that has significantly outpaced inflation over time.
Investors buy stock to potentially increase their return on investment in one or both of two ways:
1. Dividend Payments - Many companies pay portions of their annual profits to stockholders in the form of dividends. Stocks with consistent track record of paying attractive dividends are known as income stocks because investors often buy these stocks to receive the income by way of dividends in addition to being invested in the company's future growth prospects.
2By Selling the stock for more than they originally paid -Some companies
reinvest most of their profits back into the business in order to expand. Stocks of
companies with sales and earnings that are expanding faster than the general economy and faster than the average company are called growth stocks because investors expect the company to grow and expect the stock price to grow with it.
When such increase in the stock price is witnessed,investors can sell their shares for an amount greater than their purchase price, thus pocketing the difference as profit.
No comments:
Post a Comment