The stock market
It involves a lot more than buy, buy, buy; sell, sell, sell, you know.
What are shares ?
Every limited company is divided into many equal parts, known as shares. A public limited company (plc) sells its shares to the public on the Stock Exchange. By holding some of the company's shares, you own part of the company and are entitled to a number of privileges. Shares are also called equities.
What is a share certificate?
This is a printed record of your details which you need to provide if you ever decide to sell or transfer your shares.
The certificate shows your name, how many shares you own and whether you hold them alone or jointly with someone else. Your shareholder account number, a unique reference number, is also printed on the certificate.
The advantages of being a shareholder
You help to decide how the company is run. You can vote at company general meetings where each of your shares counts for one vote. Investors may also expect to receive dividends.
What is a dividend?
This is your share of company profits after tax. Usually the better a company is doing, the more it is able to pay in dividends.
Buying and selling shares
There are two ways to buy or sell shares. The first way is to trade your shares on the London Stock Exchange, using a broker or share dealing service to act for you. Most banks and building societies offer their own share dealing service.
When they have carried out your instructions, your dealing service or stockbroker will send you a contract note listing:
- the time and date of the sale or purchase
- the number of shares and their price
- the amount the deal was for (the 'consideration')
- commission charges
If you made a mistake on your contract note, speak to your stockbroker immediately, otherwise you are accepting the transaction.
The second way is to find someone who is willing to buy shares from you or sell them to you in an 'off-market transfer'. This means you do not have to go through a stockbroker.
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