In the past few months, the share market has made headlines every morning. Investing in
shares has emerged as the most popular way of generating long term wealth and fulfilling your financial goals. In fact, FY21 witnessed a whopping increase of 142 lac retail investors in India itself. Today, stocks or equities account for 12.9% of the total investments in India. As an investor, one needs to understand the basics of what the share market comprises and how it works. A share represents a unit of equity
ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face. In simple words, if you are a shareholder of a company, you hold a percentage of ownership of the issuing company in proportion to the shares you have bought. Shares can be further categorized into two types. These are: They vary based on their profitability, voting rights and treatment in the event of liquidation. These are also known as ordinary shares and comprise the bulk of the shares being issued by a particular company. Equity shares are transferable and are traded actively by investors in stock markets. As an equity shareholder, you are not only entitled to voting rights on company issues but also have the right to receive dividends. These dividends, however, are not fixed. Equity shareholders also partake in any losses faced by the
company, limited to the amount they had invested. Equity shares can be further divided based on: Here is a look at the classification of equity shares based on share capital: Here is a look at the equity share classification based
on the definition: Based on returns, here is a look at the types of shares:
Preference SharesPreferential shareholders receive preference in receiving profits of a company as compared to ordinary shareholders. Also, in the event of liquidation of a particular company, the preferential shareholders are paid off before ordinary shareholders. Here are the different types of shares in this category:
ConclusionInvesting in shares can prove to be a great source of long-term wealth generation for any individual investor. Stocks provide you with a variety of sectors and industries to choose from, helping you diversify your portfolio and mitigate your risks. Always remember to narrow down on trusted and reliable financial partners to open your Demat account and trading account, like IIFL. Related ArticlesWhat is the goal when using Crowdshaping?Crowdshaping is the ability to collect real-time data about attendees, and then adjust an event accordingly. For instance, say the crowd isn't feeling the music. Crowdshaping would relay this information to your smartphone, on which you could change the music.
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