Why to invest in stocks and shares
Investing in stock is profitable and more rewarding than saving money in the bank, though some people prefer to put their money in the bank instead of investing in stocks and shares. When you save your money in the bank it will be affected by inflation, the accrued interest is often little and the actual monetary value reduces.
There are several ways to make profits from stocks and shares and this is why many people descend to stocks and shares:
· Capital appreciation: this means growth in the price of stocks you bought. For example if you buy 20 000 units of Texaco shares at $15 per in the year 2000 totaling 300 000 and decide to sell it off in 2012 when it was $200 per share. You would have sold it at 4 000,000 making a profit of 3 700,000. This increase in price benefits of a stock over time is called capital appreciation. This is type is for all shareholders and this capital gains is as a result of demand and supply. check more on stocks
· Dividend payment: it is the money paid to shareholders from company’s current profits or accrued profits; dividend payment is the share of the company profits gain over the years of its operation. It is shared among shareholders. The dividend is given based on units of each shareholders share. And this normally done after each of the company’s financial year. This dividends are taxable and can be paid monthly, quarterly or annually, the company’s board of directors decides whether to give dividends or not, depending on some economic and financial factors.
For example if a company Q declares a dividend of $10 per shares. You will get $10 multiplied by your total number of shares. If your total share is 20000 units, then you will be paid
x 20 000 units = $200 000 as your dividends payout. This must pay into your account within the period
of six month otherwise it becomes stale. To claim it you have to change the
date at the company’s registrar office and this can be done by your
stockbroker. knowing stocks in details
· Bonus issuance: bonus is share given to shareholders for free, as a reward for investing in the company. These bonuses are given based on the number of shares you have in the company, it is given in ratios, for example a company may decides to declare 1:1 bonus to each share or 1:2 .
It means if you have 1000 unit of share you have another 1000 free units or 2000 additional unit respectively. For example in 2004 Union Bank in Nigeria declares 1:3 bonus ratios for its stockholders.
· The right of attendance of annual general meeting: another advantage of shareholding is that you have the right to attend, the annual general meeting of the cooperation, you can make decision for the successful running of the company through your votes. You can also be voted.
· Transferable: shares can easily be transferred from parent to their children and from generation to generations. see investing in gold
· Confidentiality: you can be a millionaire through stocks and shares but no one will know, until you open your mouth and say it.
· Liquidity: you can convert your shares into money within four days, one transaction date plus three business days.