| Share Dealing |
 |
| Click here to compare the true cost of over
100 share dealing accounts |
Share Dealing Account
Shares are documents issued by a company to raise finance.
A company worth £100 million may want to raise £50
million pounds of cash to fund growth and by doing this it has
taken the decision to allow 50% of the company to be owned by
members of the public, other companies and financial institutions:
or just one of these groups.
The company may feel that £1 per share is suitable and
therefore makes 50 million shares available for buyers. By buying
a share you become a part owner of that company: normally a very
small part. With shares it is more about gambling and as they
say, 'the value of your investment can go up as well as down'.
Buying and Selling Company Shares
Anyone can buy shares in a 'listed' company (listed on the London
Stock Exchange 'LSE'). Take a look at a quality daily or Sunday
newspaper to see a full list of available shares in familiar
companies. To buy a share on-line you need to register with one
of the share web sites and open a share dealing account.
Once the account is open you can buy and sell over the Internet
in 'real time': i.e. in theory, you can buy a share at 2pm for £1
and sell it again at 3pm for £1.50 if the share price has
risen in that period. There are fees to be paid for buying and
selling, so in practice a £1 share with fees can be £1.05:
this means that you need your share price to rise by 5% before
you have started, with the same scenario for selling.
Tracking Your Company Shares
The FTSE 100 ('footsie one-hundred') is a list of the top 100
UK companies that you can but a part of. Staying within the
FTSE 100 is supposed to be the safest way to trade in UK shares,
however, a number of 'technology' companies have made brief
appearances of late and that's not in any way safe! There is
an FTSE 250 (with the top 250 UK companies below the FTSE 100
bunch), and even a FTSE Eurotop 300 (Europe).
As mentioned above, take a look at a quality daily or Sunday
newspaper to see a full list of current share prices, together
with the numerous web sites dedicated to providing real time
experiences (good and bad of course). And for those of you
who love gadgets your WAP phone will keep you up to date wherever
you are.
Share Earnings: Dividends & Share
Price
Earnings from shares are two fold:
a) The value of the share can rise when the performance of
the company involved is trading well, or subject to a takeover
(therefore making the company a bigger entity), or has, say,
invented the next 'gadget' that every home needs.
b) A 'dividend' is paid from the annual profit. A company may
announce a dividend of £0.10p for each share held. However,
in less favourable years there may not be any dividend and
the share may loose value because of that. A low
or no dividend can mean that the members of the company's board
decided to re invest profit in an attempt to improve growth
and profitability in future years which is an acceptable situation
(that is if you stick around and the strategy works).
If a company has 1 million shares in the
hands of shareholders (you) and the profit for the year was £100,000, the dividend
would be £0.10p (100,000/1,000,000 = 0.10) for each share
held if they were to distribute all of the trading years profit.
You should look to hold onto your shares for about 3 years
to ensure a reasonable return. That said, there are many situations
that call for an immediate sale of all shares. You will sleep
easier if you spread your investment over a number of companies
or take part in a share club.
| Share Dealing |
|
| Click here to compare the true cost of over
100 share dealing accounts |
