Investment 101: Buying Stocks and Shares

Besides cash, bonds, and property, shares are among the four main types of investment. However, they carry the most risk, as well as the highest returns.

Equity (also known as shares) is like a tiny fraction of a company. By owning one, you own a portion of the company and its value.

In order to make money from shares, you have to buy them and keep them for a while. Patience is key!

An investor can make money from a company’s shares in two ways:

Growing companies are worth more, so the shares become more valuable – so your investment becomes more valuable as well.

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A dividend is when a company gives you a fraction of its profits each year.

It is highly risky to hold shares in just one company. This company could go out of business, and you could lose part or all of your money. By diversifying your investments – buying shares in different companies and investing in different countries and assets – or by putting your money into pooled investments such as unit trusts or OEICs, you can spread your risk.

If you own shares that you want to buy or sell, you can do so using one of two options:

A stockbroker is someone who sells or buys shares on your behalf, whether it is an online broker, a traditional stockbroker, or a financial adviser.

Alternatively, you can invest in funds through a bank, a fund manager, a financial adviser, or an online broker.