Interesting Facts on Share Trading

January 10, 2011 | Finance & Business

One way of raising the capital of a business is offering stock to the public and selling to the investors.  A person becomes an investor and a shareholder of a corporation when he buys a share of stock.  Depending on the number of shares, he becomes part-owner of the company.

What is a share of stock? It is a valuable piece of paper that signifies partial ownership position and claim on the assets and profits of the business.  The holder of the shares gets voting rights when decision is required on corporate issues.  The holder also gets a dividend which is a portion of the business profit but there is an option to reinvest the dividends instead of receiving money.

When to buy shares? Before buying shares, it is important to research on the performance and growth of the business as well as the industry it belongs to. Is there positive growth? Is it the profit in an upward trend? Are the products still in demand? How long the upward trend of sales will continue? Is there a possibility for decline in the industry growth?   If necessary, use reliable forecasts and historical data showing the stability and profitability of the business.   And be familiar with the top and best stocks in the market.

When to sell shares? The most popular signs that trigger investors to sell their stocks are:  a big jump in the price or a drop and stagnant price for several months.  It is also worth considering analysing the market, competitors, company’s plan for expansion, restructuring, performance and even revenue growth.  The question to ask is:  “Am I selling my stocks for a big profit?” or “Am I selling my stocks because of fear of further losses?”

It is also important to know that the prices of stocks are based on the forecasted earnings of the business.  And a handy tip for investors is to spread your investments by owning stocks from different industries.

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