If you don’t like pizza we can’t be friends. And if you do, don’t expect me to share. Luckily for you, there are loads of people who are willing to share. In fact sharing is often a necessary part of growth and expansion for a company or organization. By offering up and selling parts of its ownership, a company is able to use money generated from the sale of those parts to do more, make more and be more than what it is. As the name suggests, those parts that are up for grabs (at a price), are called shares. Or stocks. Or equities. Potayto, potahto.
Owning shares in a company also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote on certain company decisions, attend shareholder meetings, and more.
When you own shares in a company, you also have the opportunity to make money! Here’s how:
- First, the value of your ownership stake can go up. Let’s say you buy 1 share of your favorite company’s stock for R50. The company grows and becomes more valuable. That 1 share is now worth R60, you could sell it to make a R10 profit. Or, you could hold onto it, thinking it might go up even higher. (Of course, it could go down. If you sell that share at R40, you’d lose R10 from your initial investment)
- Second, with some stocks you’re able to earn dividends too. Dividends are company profits that some companies distribute to their shareholders. This is cold hard cash you get just for being a shareholder!
Share lingo for you to start waxing:
Stock Exchange - Stocks, shares or equities have a specific place where they are bought, it's called the stock exchange – and in Africa our biggest one is the Johannesburg Stock Exchange, aka the JSE. The JSE is a physical building in Sandton, Johannesburg, South Africa, where companies can sell their stocks, to people who want them. If you're wondering how to buy shares on the JSE, the answer is simple: by investing using your EasyEquities account.
Returns – The money you make (profit) or lose (loss) on an investment. Returns are often shown as a percentage.
Dividends - Cash the company gives to its shareholders when it makes money. The cash shows up in your brokerage account automatically. Dividends aren’t a given – a company can decide to lower or cancel dividends if times are tough. Sometimes, companies issue stock dividends instead. In that case, you end up with additional stock in the company.