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.
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