Investing in stocks and shares

Stocks and shares, unit trusts and investment trusts Shares give you part ownership of a company, so the value of your investment is linked to how the company - and the overall economy - performs. You can also invest in funds which buy shares in a wide range of different companies. Over the last 25 years it has become quite common for people to own shares directly through a number of different ways: * In the UK for example, many people bought shares when the government sold nationalized companies * some people were given shares when their building society or insurance company changed from a 'mutual' (where its members were the owners) into a company with its shares being bought and sold * as an employee you might also be awarded shares in your company as an incentive - this may be through a share option scheme, when you're offered the right to buy shares in your company in the future at a price agreed now You can also buy shares directly in companies trading on the stock exchange through a stockbroker. An alternative to owning shares directly is to invest your money in a fund or a company which, in turn, invests its money in shares. Your investments will be taken care of by a professional manager who uses skill and experience to decide which companies to invest in, buying and selling shares to grow your investment. This is called a 'managed scheme'. Your investment is spread over a larger portion of the market that you could do yourself, so reducing the risk. Unit trusts can have any number of investors, so are known as 'open-ended' funds. You invest in these funds by buying one or more 'units'. The price of units varies depending on how well the fund performs. Investment trust companies invest in other companies. Because of this these shares are limited in number, unlike unit trusts, so they're called 'closed-ended'. The value of your shares still depends on the performance of the investments but also on the demand for the investment trust company's shares themselves. You make money from your shares by the companies that you invest in declaring 'dividends' or an amount payable per share. The more shares you own, the more money you make. But of course, business trends go down as well as up, so be aware that it just as possible to loose your investments as it is to make a profit! Interested in this subject? Try this link for more of the same