Tired of hearing your friends talk about share investment and not knowing what’s going on? Well, investing in shares isn’t rocket science. Below, we’ll answer some top questions we receive all the time about share investing:
What it means to own shares?
A share, or share certificate, is a legal document that certifies ownership of a specific company. When you own shares in a company, you are considered to be a “shareholder”. Being a shareholder means you are a part owner of a company, and are entitled to the profits the company generates, even though you may not be working or running it. Exciting isn’t it?
How do you make money from share investment?
There are generally two ways investors make money from investing in shares:
1) Profit in the form of dividends: As a company makes a profit, the company may distribute a portion of that profit to its shareholders. This distribution of profit is what is known as a “dividend”.
2) Profit in the form of capital gains: As a company grows and becomes more valuable, the price of its shares may increase. Had you invested at a lower price, you would make money by selling the shares at this higher price. 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 merely takes money from a loser and gives it to a winner. No value is ever created. However, by buying shares, you are investing in a real business, which contributes to the overall wealth of an economy. Share trading can however be risky, and you could end up losing a lot of money if you speculate. 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!