There are different investment forms. One form of investing is investing in shares. A share is a proof of ownership that gives you co-determination in a company. If you own shares or a share, you will receive a dividend payment (profit distribution).
By investing in shares you own ownership certificates of companies that give you a share in the company. The company receives money for the provision of shares. You have acquired control in the company through your shares. Investing in shares is not just for gentlemen with a big cigar, the ‘ordinary’ man can also invest in shares. You buy a share by calling the bank or a broker. By owning a share you are a co-owner, but the risk you run with this form of investing is limited to the value of the share. The management of a company has the legal obligation to report annually to co-owners (the shareholders). This accountability includes an annual report with all the financial ins and outs. A committee supervises the management. If you as a shareholder are dissatisfied, they can hold a shareholders’ meeting through the Association of Securities Owners.
Shares are traded on the stock exchange, where brokers, bank representatives and so on walk around buying and selling shares. Trading takes place on the Amsterdam stock exchange from 9:30 am to 6:30 pm. The possibilities for investing via the Internet make it possible to reduce costs: lower transaction costs. Trade fairs have strict regulations to prevent abuses. A stock exchange does not benefit from stock market fraud, for example.
Share prices are quoted cum or ex dividend. Cum dividend means that the price is quoted including the proposed dividend. Ex-dividend means that you must use the last price minus the value of the dividend.
As a reward for the fact that you, as an investor, have contributed money to the capital increase of the company by purchasing shares, you receive a profit distribution: dividend. You receive a dividend from the profit made. Except when dividends are paid from past reserves. Not all profits are paid out, after all, companies still have to invest. If you, as a shareholder, believe that you are not receiving enough dividend, you can make your voice heard at the shareholders’ meeting. Dividend is also compensation that the investor receives for the risk he runs: depreciation of shares.
What does a share cost?
The price of a share depends on the popularity of the share. When many people want a share, the price rises. The price of a share falls when many people want to sell a share. A liquid stock market exists when supply and demand for a share are approximately equal. If there are no buyers for certain shares willing to pay more than the seller’s price, there is no trading. No shares may be sold below a certain price.
A market order is an order without a limit that an investor passes on to a bank or broker. Best orders are placed when no major price fluctuations are expected: the aim of the investor with a best order is to be able to trade very favorably on the day of purchase/sale.
Transactions are processed via a clearing method: a computer system (Euronext Clearing and Depositary) that ensures that all securities notes are available to investors shortly. Payment is made simultaneously. The purpose of clearing is to provide a guarantee. Warranty is indispensable for trade. If a committee house is unreliable, does not pay or does not deliver securities, ECD stands as guarantor. In any case, the transaction will still take place by indenting ECD.