Part 13a What are shares?

Companies issue shares to raise the capital they need. Shares of most of the biggest companies in South Africa are "listed" on the JSE (the "stock market"). This means they are "public companies". Any member of the public has the right to own a part of a listed company. All you have to do (if you have the money) is go to a stockbroker

and ask him or her to buy you some shares in Company X. And there you are, you own a bit of that company!

A share that you buy on a stock market is exactly that! If you own shares, you own a small part of that company.

It works like this ...

A listed

company issues shares

to the public - usually many millions. These are then traded on the stock exchange. You decide the company is a good investment, so you buy, say, 1 000 shares.

Because the company sometimes does well and sometimes not so well, the price

of the shares can vary

from one day to the next. Other factors, such as the overall economy

, also affect share prices. As a result, next month or next year, the shares you bought may be worth more (or even less) than what you paid for them.

While you own the shares, you receive any dividends

that the company declares

. Dividends are the way companies reward shareholders by making distributions of a portion of profits. Some people have grown wealthy by buying shares when they were cheap and then selling them when prices went up.

Would you like to invest in shares?

When you invest in shares, you invest indirectly in the economy of the country.

But there are a few basic rules to bear in mind ...

Continued next week