What are shares and why are they issued?

In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock mark

Quick Facts on Stocks and Shares

  • Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer no guarantee of any returns and can lose value, even in the long run

  • Investments in stocks can generate returns through dividends, even if the price

  • Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues

In today's financial markets, the distinction between stocks and shares has been somewhat blurred. However, the difference between the two words comes from the context in which they are used.

For example, "stock" is a general term used to describe the ownership certificates of any company, in general, and "shares" refers to a the ownership certificates of a particular company. So, if investors say they own stocks, they are generally referring to their overall ownership in one or more companies.

Bottom line, stocks and shares are the same thing.

How does one trade in shares ?

Every transaction in the stock exchange is carried out through licensed members called brokers.To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.The general investors should identify a sub-broker for regular trading in shares and palce his order for purchase and sale through the sub-broker. The sub/broker will transmit the order to his broker who will then execute it .

Issuing shares in your company on a stock market can provide:

  • new finance
  • an exit for founding investors who want to realise their investment
  • a mechanism for investors to trade shares
  • a market valuation for the company
  • an incentive for staff using shares or share options
  • an acquisition currency in the form of shares