What are the benefits of owning a share?

Many people are excited about investing in the shares market and enjoy the benefits of owning a share. You might also have thought about investing in

Many people are excited about investing in the shares market and enjoy the benefits of owning a share. You might also have thought about investing in stocks but haven’t done it because you’re not sure what you’ll get back and make a profit or not.

Investing in stocks comes with risks but it can be minimized with proper research about your investment. Owning a share can be a great way to invest your money. When you own stocks in different companies, you will have more savings, keep your money safe from inflation and taxes, and help you make money from your investment. So, in this blog, you will learn about shares and the benefits of owning a share.

What are shares?

You must understand what shares are before you learn about the benefits of owning shares. Shares are the smallest unit of the company. This means that when you own shares, you own a portion of the company. You can partake in the decision-making of the company and affect the operation of the company.�

They are listed in the primary market as IPOs or Initial Public Offering. If the initially issued IPO is not sufficient for the funds, they can also issue a FPO which is also known as Follow on Public Offer. Shares of publicly listed companies can be bought from the secondary market, and for that, you must open a TMS account from any brokers in Nepal.

What are the benefits of owning a share of the company?

The benefits of owning a share of the company are listed below:

Cash Dividend

The cash dividend is the monetary compensation paid to the shareholders for their investment. The company pays a certain amount of the profit it makes in a year as cash dividends to the shareholders.�

It is done periodically such as; monthly, quarterly, or annually, depending on the terms of the company. They can also be a one-time payment, meaning the payment is made after settlement.�

It is important to note that a cash dividend is given out only when the company is operating at a profit. The profit after retained earnings is given and distributed as profit.

Bonus Share

Bonus shares are the shares that are offered as compensation to the shareholders for their investments. Sometimes, the company does not distribute cash dividends and retains them with themselves for the future. But, they will have to pay their shareholders in some way or they could lose their shareholders.

The shareholders do not have to buy these shares. They are offered to the existing shareholders based on the current amount of shares they hold. The profit of the company is held within the company and the shares are given out as payment.

Profit in the secondary market

One of the benefits of owning shares is you can sell them. The share market is a dynamic market where the prices of the shares are constantly fluctuating.�

If the company does well, the value of its shares can increase, whereas, if the company does not do well, the shares of the company will fall below the market price.�

You can make a profit by taking advantage of this fluctuation in the share market. When the value of the shares of the company increases, you can sell your shares. This way, you can earn fast and do not have to wait for when the company starts distributing the cash dividend.

Making decisions for the company

Being the shareholder of a company means you are part owner of the company. You can also partake in the decision-making of the company. It means that you can affect the decision-making of the company, based on what you think is the best for the company.

Now, the impact of your decisions is affected by how many shares you own. This should be basic knowledge. If you own only 20 shares, you will not make the same impact as someone who owns 100 shares.�

Why do companies issue shares?

Companies will issue their shares when they need capital funds. The funds raised by issuing shares are then used for running the company. As compensation, the company offers cash dividends or bonus shares to the shareholders of the company.�

If you do not want to hold the shares of the company any longer. You can sell the shares in the secondary market. If the valuation of your share has increased, you will gain capital gain and if the value of your share has decreased, you will incur capital loss.

Conclusion

The company always operates in favor of the shareholder. They make decisions that will increase the value of the shareholders. If you can do proper research, you can make money in the share market. But you will have to be very alert and make only calculated decisions.�

You cannot expect to earn money if you have not made any proper decisions. So, choose what company you want to invest in wisely.

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FAQs

What is the benefit of owning a share?

Owning a share can give you a lot of benefits like cash dividends, bonus shares, and profit from selling the share in the share market.

What is kitta in the share market?

In the Nepalese share market, ‘kitta’ refers to the unit of share.�

Do you get money from owning shares?

Yes, you do receive cash dividends from owning shares. The cash dividend is the distribution of the company’s profit to the shareholders.

What happens when you own 1 share?

If you are applying for IPOs, you cannot just buy 1 share of the company. But, if you are in the secondary market, you can buy 1 share, which means if are a part of the company.

What are the risks of being a shareholder?

Being a shareholder of the shareholder means you are equally prone to the risks of the company.

Why do shareholders get paid?

Shareholders get paid as compensation for their investment. Shareholders get paid when the company earns profit.