Sunday, August 1, 2010

Shares, Shareholders and Share Market

Whenever a company wants more money for their work they have alternatives. They can take loan from banks. If they take loan from bank they have to give collateral securities and also should give interest for loan. They have to repay loan in convenient installments or in a whole lot. The other way is that they can sell shares to public and can accumulate money in the form of capital. But for this purpose the rules and regulations of the nation and of the company should allow to issue its shares to public. By doing so they are sharing their ownership with shareholders. They have to share a part of the profit of the company with the share holders and it is called dividend. For the share capital they should not pay interest and also they should not pay back the money. Only a part of profit they have to share with shareholders.

Stock exchange is market place where the company and business people can buy and sell shares. For selling their own shares by a company they have to list in any stock exchanges. For this purpose they have to complete so many formalities and if they allowed they can issue I.P.O (Initial Public Offerings) which means the first issue of shares by a company. This is called “primary offerings”.

Share holders have the option to sell their shares or keep it with them. Those who wish to make money by trading shares they can sell shares and buy other shares as they wish. This is called “secondary offerings”. Normally a share holder cannot take part the decision making process of the company. They can just keep the shares and can earn a part of the company’s profit in the form of dividend. (If there is no profit no dividend.) So shareholders sell their shares in stock exchanges for a higher value and make profit out of it. Whenever they need they can buy shares form the stock market. Stock market is a trading place of shares.
After getting listed the value of shares may go up or go down according to the performance of the company and also due to other many reasons. An intelligent trader makes profit out of the fluctuations of the value of shares. When the demand of particular share increases and the supply of the share is not enough to meet the demand the value of share increases and vice versa. There are so many other reasons also which affects the value of shares. It is important to know these reasons in time to become a successful stock trader. But now working people and even housewife also become successful stock traders.

Learn the market well and make money from stock market. But keep in mind that you should be vigilant, unless your hard-earned money will be vanished in no time.

Courtesy:  Investment And Money Matters

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