Important Facts About Share brokers

What Are ‘Shares’?

The capital stock of a company is divided into equal parts and a ‘Share’ is one of the equal parts of the stock. The main difference between a stock and a share is that the stock of a company is divided into equal portions and one such equal portion is termed as a share. So, when investors receive a share of a company, they receive a portion of the stock or the ownership of a company (proportional to the number of shares they own). In addition, when they receive a share of a company, they automatically acquire the right to receive their share of the company’s profits (proportional to the number of shares they own), commonly known as dividends and interests.

A person or a company or an organization who owns or holds a share is known as a ‘shareholder’. Share ownership is indicated by ‘Share Certificates’. Earlier, companies issued physical paper stock certificates to shareholders but nowadays, shares are being given to shareholders in a digitized format.At present, companies prefer to register this act or instance of purchase electronically via CREST or DTCC (A central securities depository).

Companies generally have two kinds of shares; common shares and preferred shares. Therefore, companies usually have two kinds of shareholders; common and preferred shareholders.

The Role Of A Share-Broker

Now, people cannot directly purchase shares from share trading exchanges like BSE (Bombay Stock Exchange) or NSE(National Stock Exchange). They have to buy these shares, using the services of a registered broker, stockbroker or a sub-broker or a brokerage firm in a stock exchange or over-the-counter markets. Such a middle man who buys shares for people is known as a share broker and a firm that purchases shares for people is known as a Share broking firm.

Why Do People Invest Their Money In Shares?

Though buying shares can be risky, the first reason why people buy shares of companies is because they receive an income via dividends.More profitable the company, higher its dividend rate and greater income for the investor.

The next purpose of buying shares is to see their money appreciate in value over time and generate more income. For example, an individual buys 50 shares of ABC at Rs 20 per share on May 31, 2010 and sells these shares when they command a high price of Rs 2000 per share on February 18, 2018 in the share market.

A share of a company is a limited ownership of that company; So, when investors buy shares, they are taking a share of the ownership of that company (proportional to the number of shares they own).So, many investors buy shares to achieve both income and a sense of security that comes with ownership of a company(proportional to the number of shares they own).

Many people also prefer to invest in a range of investment products and are not content with investing amounts in financial assets such as fixed deposits, gold or real-estate. Then, they buy shares of companies to expand their investment portfolio.