aoe tala OV ASIC es Coe am aN 2 on an exchange? What are Can a young person ie letowg also make an investment on the BS Gre arte 9 > K Do | need millions to be able to invest? Ey 5 x shy Investment in shares on an exchange SeWhy would | want to buy shares? People invest in shares in order to achieve financial independence. They can even pay for any long-term projects including payment for their children’s education. The costs of trading in shares are usually lower than investing in other markets. Research indicates that the return on shares has in most cases exceeded the inflation rate for the last hundred years. Most companies also pay a portion of their net profits (return) to shareholders - this is called a dividend. Diversifying your savings into different savings vehicles, such as shares, spreads your risks. What are shares? Shares represent ownership of a company. If you buy a share of company A, you become a part-owner of that company. Because you are a part-owner (shareholder), you are entitled to a portion of the company’s profits. The profits that a shareholder is entitled to are paid to him or her in a form of dividends. Normally companies pay out dividends once or twice a year. If the company in which you bought shares fails and is liquidated, you as the shareholder can claim against the assets of that company. The shares you own also come with voting rights. This means that as a shareholder you can vote at the company’s annual general meeting. Remember that shareholders are not involved in the day to day operations/management of the company. Once you buy these shares your broker will send you a note which notifies you that a sale or buy of shares has been performed on your behalf. After that a share certificate will be forwarded to you as proof of ownership. Today share certificates are no longer in a paper form but in an electronic form. Your broker keeps the share certificates in electronic form for you. In 1996, the exchange terminated the buying and selling of shares on the floor. This was replaced by an electronic system of buying and selling of the shares.Where can one buy shares? Shares can be bought on an exchange through a broker. These are known as listed shares. In South Africa, these shares can be bought on the JSE Limited ("USE"). The JSE is a stock exchange licensed by the Financial Services Board. However, there are other shares that are not listed. Shares that are not listed on an exchange are bought on the over the counter (OTC) market. For your own protection as a consumer you should buy shares that are listed on the exchange as opposed to the ones that are not listed. Shares that are not listed are more risky as the market in which they trade is not regulated. In this market if anything goes wrong, you would have little recourse as an investor. The JSE brings buyers and sellers of shares together and matches the prices. The JSE stands good behind every deal in this listed market, which is quite different for the minimal security offered and by the (OTC) market. Who issues shares and why? Most companies issue shares. Companies come to the exchange to list their shares for the purpose of raising money (capital) they require for growth. The money is raised through the issuance of shares which are traded on the exchange. Issuing shares is advantageous because the company is not required to pay back the money or make interest payments on the money raised. What determines the price of a share? Share prices change often, sometimes many times in one day! If a company makes a profit, more people will want to own shares in the company and the prices of the shares will rise. However, if the company does badly, people will not invest in the shares of the company. It will result in a decrease in the demand for the shares and shareholders will start selling shares. The price and the value of the shares will decline as a result. Economic and political factors also play a role in influencing the price of shares. Who can buy shares? Shares of most of the world's large companies are listed on stock exchanges which means they can be bought by ordinary people who then have an investment in the company. This market is not only for the public, but also for institutions. People who are financially independent are the ones that can buy shares. You should only invest in shares with the money that remains after all your basic needs have been taken care of. You should not borrow money to buy shares.