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The basic building blocks of investing- the “share” explained

by , 19 December 2013

You must be really eager to get to the nuts and bolts of buying and selling shares - but it's important you first familiarise yourself with the basic concepts before you do.

A share is your chance to own a piece of the ‘big time’!
But what is a share?
 
A share is a portion of a company. You can buy and sell shares on a stock exchange, or by other agreement. 
 
Each share confers proportional voting rights on its holder and entitles the holder to a proportional share in the profits of a company.
 
This tells us exactly what a share is. You also need to know how a share comes into existence. To do this you’ll have to find out a bit more about companies in South Africa.
 
Let’s talk about private and public companies
There are plenty of books on companies and types of business entities – and it’s certainly not our intention to spend too much time reinvestigating the topic. 
 
You should all know about the sole proprietor and close corporation. 
 
While these types of business establishments are very prevalent in the local economy, they’re not the type we’re interested in... Instead, we will focus on private companies and public companies. 
 
Private companies are limited to a maximum of 50 shareholders and have to append the words ‘(Pty) Limited’ to their names. A good example of a private company is our publisher: Fleet Street Publications(Pty) Limited.
 
When it comes to shares and stock markets, you’ll mostly be concerned with public companies. These are the type of companiesy that will often raise capital by inviting the public (you and me) to subscribe for shares... 
 
They’re not limited to a maximum number of shareholders– but must have at least seven!
 
These public companies are on the Johannesburg Securities Exchange and can have millions upon millions of shares (and shareholders). 
 
As a private investor you’re able to buy and sell shares in public companies that are listed on the Johannesburg Securities Exchange.
 
Through your purchase you become part owner of the company that issued the shares.
 
Now that I know what a ‘share’ is, what do I need to do next? 
 
Those are the basics of what a share is. But before you go out and buy shares, you need to understand unserstand how the stock market works. That way you can avoid some of the pitfalls new investors sometimes suffer. 
 
FSP Invest has compiled the all-you-need-to-know definitive guide to stock market investing. It’ll reveal everything you need to know to start investing, confidently and with ease. 
 
Purchase your copy of Fear, Greed and the Stock Market today, and unleash all the wealth of the stock market!  
 


The basic building blocks of investing- the “share” explained
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