- Product Info
- Optional Extra
- Learn
- Shares 101
- Roadmap to Wealth
- How to Select my Shares
- Understanding Investing
- Understanding Markets
- Analysing a Company
- Managing my Portfolio
- Investing in Krugerrands
- Calculators
- Shares FAQ
- Krugerrands FAQ
- Share Swarm
Why should I invest in shares?
Introduction
Many people have become richer in the past few years by investing in the share market. To illustrate why you should invest in shares over any other asset class, take a look below
| Asset Class | Comparison to Equities |
| Equities (Shares) |
|
| Property |
|
| Cash |
|
| Bonds |
|
Despite these advantages of investing in equities, a lot of investors have lost a lot of money. The difference between success and failure depends on how knowledgeable you are about investing in shares. It is personal preparation as much as knowledge and research that distinguishes a successful share investor from an unsuccessful one. This section is an important step in understanding this mysterious world of share investing.
Owning shares
- As a shareholder, you are a part owner of the company, which means that you have a right to share in the company profits (called dividends).
- Dividends are paid at the discretion of the company's directors. Many companies don't declare dividends but rather use the profits of the company to grow the business.
- Shareholders make money in two ways: by selling shares at a higher price than they paid for them and receiving dividends.
Rights of shareholders
- Attend and vote at the company's annual general meeting (ordinary shareholders) and vote on subsequent corporate actions undertaken by the company.
- Receive annual reports and interim reports.
- Receive a share of profits (dividends).
- Share in the underlying assets should the company be liquidated, after all other creditors have been paid.
- Shareholders have limited liability which means as a shareholder you are not personally liable if the company is unable to pay its debts. As a result the maximum that you can lose on a share investment is the amount that you paid for the share.
The fundamental rule is: The higher one's risk, the greater the expectation of receiving a high return. The opposite is also true however: the higher the risk, the greater the chance that that the return will be zero or negative.
Learn about diversification
Diversification is one of the main principles of building any investment plan. Everybody's heard the saying 'don't put all your eggs in one basket'. This is exactly the same as the principle of diversification, which means spreading out your investments between different asset classes and over sectors within the asset classes in order to minimise risk.