Whether it’s by direct purchase, via a managed fund or through superannuation, most Australians hold some form of shares and don’t understand how the numbers on their screen are invested. Many of us are aware that if the numbers in the finance report on the evening news are mostly green that’s good and if they’re red that’s bad, but beyond that we give little thought to what shares are and why we should take an interest in them.
What’s a share?
When you buy shares you aren’t just buying a piece of paper or a digital entry on an electronic register. You are actually buying a physical part of a company. It might be a tiny fraction of the total value, but it still provides you with certain rights and responsibilities, including the opportunity to participate in the direction of the company. Shares are real assets, and depending on the size and stability of the company, you can even borrow against them.
For most people, the most important aspect to share ownership is being able to share in the profits and growth of the company. For ordinary shares, a portion of the profit is usually paid out via twice-yearly dividends. Some profits may be retained to fund the growth of the company, and this should be reflected in an increase is share price over time. These capital gains can be realised by selling the shares. The downside is that, if the company does poorly, investors may see a fall in the value of their shares.
Beyond receiving dividends and (hopefully) watching the share price increase, many investors take little interest in their shares. But shareholders also enjoy the right to have a say in the running of the business, by voting for or against the appointment of specific directors and on resolutions at the Annual General Meeting. One share equals one vote, so large institutional investors such as superannuation funds usually have the greatest say, but even small investors can turn up at the AGM and potentially ask questions of the board. And groups of shareholders may get together to influence a company’s direction on a range of business or governance issues.
Buying shares in up and coming companies is also a way of putting one’s money where one’s values and interests are, for example in renewable energy, recycling, medical technologies, batteries or emerging markets.
The rewards of investing in shares can be enormous, and they’re not just financial. There’s real pride to be gained from looking at a company that has achieved great things and to know that you’ve played a part in its success.
However, there is a financial risk associated with owning shares, so if you want to treat your share portfolio as more than just numbers on a screen, talk to our team based in Oran Park or Baulkham Hills/ Norwest Business Park office on (02) 9188 1547 or email email@example.com We service the Greater Sydney region and are able to provide meetings via zoom or out of the office if required.
The information in this website and the links has been prepared for general information purposes only by our office and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax, or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances.