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An Introduction To Shares And How They Work

An Introduction To Shares And How They Work

Initial dividend yields

The initial dividend yield is the share of its profits that a company pays to its shareholders. The dividend is generally paid every six months. Not all of the company's profits are paid in dividends. A company's Board of directors will usually decide how much of the profit should be distributed back to the shareholders and how much should be ploughed back into the business to increase further the company's worth. In some cases, the Board may decide to re-invest the entire profit

Tax

Tax benefits from shareholdings are available because many companies pay tax on their profits, meaning investors receive tax credits on the dividends they receive. Shareholders may pay little or no tax on the dividends they receive.

Most shares are a liquid investment

That is, they can be bought and sold as required. Selling a property can take months. Selling a share can take seconds. Shareholders can choose to divest themselves of just a portion of their holdings in a particular company, or they can sell the lot. Such an option is not available with property.

Shares have a definite value

It is easy to ascertain the true value of shares. Another advantage is that the true value of a share investment can easily be ascertained. It is as simple as looking up the daily share market results in the newspaper or on your computer. If only it was that easy to value a property.

Diversification

Creating a share portfolio enables you to invest in a number of industry sectors. By investing in companies operating in different industry sectors, you minimise losses from one badly performing sector. As one sector suffers a downturn, another may be experiencing growth. This is one of the major reasons that a well-balanced share portfolio invariably outperforms many other types of investments.

An Introduction To Shares And How They Work

An Introduction To Shares And How They Work

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