Investing in shares

A share is a security with which you hold a piece of property in the hands of a company. You benefit from this in the form of a dividend or if the share price rises. Buying a share also gives you voting rights at the company's shareholder meeting. In addition, you will usually receive priority buying when the company issues new shares.

A share is proof of participation in the equity of a company. As a result, a shareholder is co-owner of the company for the percentage that he holds. A share normally has voting rights and you as a shareholder can vote at the shareholders' meeting.


The more shares you own, the greater your say. In addition, a shareholder is in principle entitled to a dividend if the company distributes it. If the business results are good at the end of a period, the company may elect to distribute the profit (or part) to its shareholders in the form of dividend. If business results are not good, companies usually reduce their dividends or pay no dividends at all.

A company is not obliged to pay out the profit as a dividend, but can also choose to invest the profit. In particular, growth companies hope to grow faster by investing their profits, which is ultimately in the interest of their shareholders. Investors who invest in these types of growth stocks are not interested in the dividend, but hope to get their return with a price gain on the shares.

The value or price of a share is determined by various factors, such as supply and demand, dividends, economic and business developments and the political climate.

When buying shares, investors become part of a business, which comes with certain rights and responsibilities. Typically, investors invest in stocks in order to grow assets through a rising stock price or to generate additional income in the form of dividends. This web page explains what stocks are, how this product works and what it can be used for. Investing in shares offers investors the opportunity to achieve capital growth through both share price changes and additional income in the form of dividends.

Capital growth

Investors buy shares with the hope that their investment will increase in value in the form of a price increase. Equity investments typically offer the long-term potential for the highest returns of all asset classes. However, equities also show the greatest short-term fluctuations in value. The return achieved is influenced by factors such as corporate profits, interest rates and the general economic situation. A share price can therefore be influenced by both market risk and share-specific risks.

Dividend income

Companies can distribute their profits in the form of a dividend. To be entitled to dividend, an investor must have purchased the shares before the ex-dividend date. If the shares were purchased on or after this date, the former shareholder will receive the dividend. On the ex-dividend date, the share price normally falls with the amount of the dividend (gross dividend). The dividend is paid in the form of cash or shares. Companies decide in what form they pay the dividend or give investors the choice. Investors who are entitled to dividends but have not made a dividend choice always receive the company's default choice, which is generally cash. Dividend payments may supplement an investor's income or serve as a general periodic income stream. 

Liquidity

With stocks, your portfolio is fairly liquid, because you can switch shares to cash at any time. As long as a share is traded on an exchange and trading is not stopped, shares can be sold relatively quickly for cash. However, consider stocks that are relatively illiquid. As a rule of thumb for illiquid stocks, liquidity has a positive relationship to a company's stock market value.

Scatter

Some investors fall into the trap of investing all their assets in one sector or asset class. The so-called concentration risk decreases due to the spread of capital over several shares, sectors or investment categories. Within the investment category of shares, the investor can diversify into different sectors.