Shares are the individual unit parts into which the capital of joint stock companies is divided. The owner of a share, therefore, owns a “piece” of the company, with all rights and obligations.
How do they work?
Companies issue shares to raise additional money to invest and the shareholder, therefore the investor, who has bought some of these shares, benefits from the so-called dividend; therefore it means that he could receive a part of the company profits, if any. In addition to this, the shareholder can also obtain income from the sale of his shares to other investors.
The types of shares are different and are distinguished by a plurality of factors.
Ordinary shares: do not attribute any specific privileges regarding the distribution of dividends to those who purchase them
Preferred shares: unlike ordinary shares, they enjoy privileges in the distribution of profits or in the repayment of capital in the event of the dissolution of the company. Preferred shares can also be issued by unlisted companies.
Savings shares: can only be issued by companies listed on Italian or EU regulated markets.
Why does a company issue shares?
Through the sale of shares, the company recovers financial liquidity which it can use to make subsequent investments.
Why buy shares in a company?
By purchasing company shares, the investor has the right to obtain dividends, i.e. a part of the company’s profits and, in addition to these, can obtain a profit from the sale of the same shares to third parties.
The share as a fraction of the capital of a company
What are stocks? Stocks are securities that represent a portion of a company’s capital and allow investors to become owners of a portion of the company. Even if you are not familiar with the concepts of law, it is enough for you to know that when you hear the acronym SpA, joint stock company, or Sapa, limited partnership for shares, you are referring to companies that have chosen, in terms of legal structure, to distribute its capital into shares.
Through the purchase of a single share, one becomes the owner of the company, even if perhaps for a very small fraction. In this way you become part of the company’s share capital and acquire certain economic and financial rights, such as the possibility of receiving dividends if decided by the management, and administrative rights, for example exercising the right to vote in the various shareholders’ meetings thus influencing company decisions.
The market as an encounter between supply and demand
The stock market, which also takes the name of Borsa, has the main purpose of connecting the demand for capital, represented by companies that need to finance themselves, and the supply of capital, given by investors who want to use their savings.
The shares of a company can be bought both on the primary market and on the secondary market. The primary market is the market in which a stock is offered for the first time through an initial public offering (IPO). Through this procedure, the company in question is admitted to listing on the regulated market.
By secondary market, on the other hand, we mean the place where the securities are already free to circulate and be exchanged among investors. The meeting of supply and demand also determines the price trend of a security over time: if there is a lot of demand, and therefore a lot of interest from investors, the price rises, otherwise in the event of an excess supply , goes down.
WHEN TO BUY AND SELL SHARES?
The difficulty in managing shares lies precisely in this. It is generally recommended to buy when the market is not doing very well and to resell when the indices tend to rise. Furthermore, it is useful to set loss thresholds so as not to go beyond these figures. To do all this, therefore, it is essential to know and understand the performance of the stock exchange and its related trends.
IS INVESTING IN STOCKS RISKY?
It is not possible to predict the trend of the markets. As in any form of investment, risk is an essential component of equity investment, without which it would not be possible to expect a higher return. For this reason it is essential to invest in shares with a medium-long investment horizon, i.e. imagining that you do not have to divest your capital in the short term, because the investment could bear fruit over time.
