Share Dealing Explained
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With share dealing, you are purchasing a stake in a public company and cannot guarantee to recover all your capital. You share in the company's profits but also in the any losses. Neither can you depend on past performance as an indicator of future growth - who could have known that big names such as Equitable Life or Marconi could have plunged as they did? However, taking a medium risk brings potential for medium and possibly high returns. Do so if you can afford to leave your investments to mature over a suitable period of time. Ordinary shares are also known as equities (stocks are long-term loans which do not necessarily confer any rights of ownership in a company). Apart from being financial assets, share allow you to vote on company policy and management and collect dividends if the company makes a profit. While medium-risk shares are often bought in the hope of maximum capital growth, some offer the prospect of growth combined with income in the form of dividends, though usually the yield is at a lower level than with bonds. There are plenty of internet sites designed to make buying and selling equities and bonds easy and comparatively inexpensive. This falls into the no-frills category of stockbroking, but you may prefers to pay to pay for an advisory service or even a discretionary one, allowing a broker to manage your portfolio. However, such service will expect you to have at least £20,000 at their disposal. Apart from needing a high level of capital to achieve a good, balanced portfolio, managing it successfully can be hard work. For many small investors, it makes sense to pool resources with others and buy into a collective scheme such as a unit or investment trust. |