What are stocks and how they earn: A guide for the novice investor

Many of us stock market seems inhumanly complicated mechanism, to understand in which under force unless Warren Buffett and Exchange vorotilam of cinema. In reality, everything is much simpler. Promotions - a convenient and effective tool to earn money and learn how to use it can be everything. We have prepared a brief guide to the world of investments, which will help you understand how you can earn income by purchasing securities.

This material - a kind of introductory lecture for those who wants to make an investment, but do not know where exactly to start. If after reading it you will want to delve more into the topic can be fully trained in the portal "Investing 101". The course materials are prepared in conjunction with professional traders and analysts' BCS Broker "and combines theoretical with practical training units. So, what is a stock?

Stock - a security which gives the holder the right to participate in managing the company and receive a portion of its profits.

In simplified form, it looks like this: the company needs money to develop, so it appealed for help to the investors who provide the necessary amount. In return, they receive a share of the ownership of some of the company expressed in actions.

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The total nominal value of the shares shall be an amount equal to the authorized capital of the company. Investors can be both physical and legal entities, and their share in the share capital It is determined by the ratio of available property in the company's securities to the total volume of its shares. Part of the annual profit of the company returns to shareholders as a dividend - a kind of gratitude for the financial support.

types of shares

There are ordinary and preferred shares. The company can produce both of these types, or be limited only to the usual. Volume preferred securities must not exceed 25% of the total amount. The difference between the two categories lies in order to profit and opportunities to influence the adoption of important decisions for the company.

common stock give the investor the right to participate in the general meeting of shareholders - the highest governing body of the joint-stock company. Payment of dividends on such shares are not guaranteed and are only after the distribution of prizes between the owners of preferred shares.

owners preference shares in the management of the company do not participate (except for the decision on reorganization or liquidation of the company), but the size of their dividends more than the owners of ordinary securities. The ratio of premiums on ordinary and preference shares recorded in the Company's Charter. Furthermore, it is preferred shares have priority right to receive payment at the end of the year.

Additional benefits offered and the total number of shares owned by one shareholder:

• 1% of the shares makes it possible to find a list of other shareholders.
• 2% of the shares allow you to make questions in the agenda of the general meeting of shareholders and nominate candidates to the Board of Directors and the Audit Commission.
• 10% of shares are entitled to convene an extraordinary shareholders' meeting and the audit.
• 25% + 1 share - a blocking stake. It allows you to reject in general meeting decisions, which require the adoption of the consent of 75% of shareholders (and amendments amendments to the charter, reorganization and liquidation of the company, as well as other issues related to the declared shares and the repayment has placed).
• 50% + 1 share - a controlling stake, giving the owner the right to decide on all other issues discussed at the general meeting of shareholders.
• 75% + 1 share gives the holder an opportunity to make any decisions on the management of the company.

How to earn with shares

It is clear that the average market participant does not have sufficient securities to directly or indirectly influence the fate of the company. However, this he did not need, because the main purpose of buying shares - profit. Earn here are two ways to get dividends or income from the difference between the purchase price and the sale of shares.

dividends

dividend payment source - the company's net income, ie the amount remaining after taxes. The dividend amount is determined for the fiscal year (in some cases - quarter, half or nine months) on the board of directors, and then the solution is submitted to the Shareholders' Meeting. Shareholders may approve the proposed payment or reduce them, if they consider that the company needed more resources for successful development. The right to receive the dividend are the investors registered in the register of shareholders at the balance sheet date. This date may not be earlier than 10 or after 25 days from the date of the decision to pay.

Procedure and terms of payment of dividends are determined by the company's charter or the decision of the shareholders' meeting. For ordinary shareholders during this period is not more than 25 working days from the date of determination of the circle of persons entitled to receive dividends.

The person representing the interests of the investor - the nominal holder and the trustee, registered in the shareholder register, - get their money no later than 10 days from the same point. During this period the cash dividends sent to the recipient postal transfer or credited to his bank account.

Exchange difference

Get extra income can be and with the help of trading in securities. You earn here on the difference between the purchase price and sale - buy cheaper and sell more expensive. For trade makes sense to choose common stock: liquidity (the ability to easily bought and sold) higher than that of the privileged. It should be remembered that after the closing of the registry value of the securities falls roughly in the amount of dividends paid. If you want to buy shares of a good time, and for sale from best to wait a couple of months up to six months: the share price usually returns to its previous level or even exceeds it.

Theory theory, but directly with his head dipped into the trade still exciting. The first step is best done in the simulator on the portal "Investing 101". The situation is close to the real, so you can safely assimilated, without the risk of losing all their savings. When will acquire the necessary skills and feel confident in their abilities, you can move and real exchange trade.

Advantages of shares to bank deposits

It would seem, why study the financial performance of large companies-players of the market and create investment portfolio, if you can just carry their money in the bank, and after some time to pick up already slightly increased amount? You can not argue. But shares have their advantages, which make them a very attractive tool for investment.

1. Means that you have given deposited in a bank, can not be removed until a certain date. Shares can be bought and sold at any convenient time - at least several times a day.
2. The maximum value of the deposit, subject to insurance - 1.4 million rubles. If your account was more money in case of bankruptcy of a bank or revocation of the license is necessary to rely only on the partial reimbursement of lost funds. Desheveyuschie stocks tend to be sold - and even in this case, you compensate for part of the money, if you buy more shares at a lower price.
3. The potential return on equity greatly exceeds the bank deposit rate. Dividends are taxed at 13%, but in view of annual payments can be greater than on term deposits.
4. In the case of stocks you have more opportunity to personally influence the increase in their savings. The final profit is generated not only from the dividend, but also from the price of securities.

As you can see, nothing wrong and incomprehensible in the securities no. Learn the theory, apply it in practice, and you will see that the world's largest investors knowingly invest their billions is in stock.

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