EQUITIES, SHARES…
Shares, also known as equities, are the preferred ‘real’ asset for many investors. Buying shares in a company provides you with a portion of the company’s value and a stake in its profits, which are distributed yearly or half-yearly to shareholders as dividends.
Broadly speaking, the value of a company should keep pace with inflation value because the prices it charges for goods and services rise with inflation. If you invest in a company for a long enough time, and if the company succeeds in growing the overall of its business, the value of its shares may grow faster than inflation. This can provide you with substantial capital growth.
Of course, the opposite may happen and the share value may fall. Investing in shares always carries a degree of risk, although as we shall see, there are various ways to reduce this to a level I find acceptable.
You can buy shares yourself through a stockbroker. If you have experience of a particular industry, you can use it to your advantage when you make an investment decision. But deciding which shares to buy is difficult and, once again, time consuming. You will have to research potential stocks carefully. You may examine past performance, and be able to differentiate between sales growth and earnings. You must decide whether to invest in a company that has low growth at present but which has great potential for growing in the future.
You must be sure that the company you want to invest in has a healthy balance sheet. And you must be able to resist the urge to invest in the hot stock of the moment. Often, the ‘next big thing’ amounts to nothing.