How do stocks work?

Shares can be purchased in the limited companies that have their shares listed on an exchange or trading platform. By buying shares in a company, you become a partner. As soon as you have bought one or more shares, you are registered as the owner in the share register, which functions as a register of all owners. In the past, you also received a share certificate when buying shares that served as a physical certificate of ownership, but today all share trading and handling takes place digitally.

How to make money on stocks?

Simply put, you can make money on your shares by reselling them for a higher price than you bought them for or through dividends on shares. If the company has received a surplus in its profit, a dividend can be paid to the shareholders in the form of contact returns. You can then choose to withdraw cash or reinvest in new shares. How much of the dividend you receive depends on your ownership interest in the company – ie how many shares you own. Sometimes, however, no dividend is paid at all, which is usually due to the company choosing to reinvest any surplus in the company’s operations for the future.

Why do companies issue shares?

Companies issue shares to finance their company either through company formation or when they need a new addition of capital – which is called a new share issue.

Rights and responsibilities as a shareholder

As a partner in a company, you have the right to vote at the annual general meeting, which is your opportunity to influence the company’s development. In reality, however, you are required to be one of the main owners in order to have a real impact on the company’s development. A shareholder’s liability is limited to the invested capital. He is thus not personally liable in the event of bankruptcy.

Different types of shares

The different types of shares that exist are A-, B- and C-shares (also called ordinary shares, which are the ones you usually refer to when talking about shares in ordinary speech) and preference shares. The different types of stocks can provide different benefits. For example, in a company, it can only be the A shares that give the right to vote, so if you want to participate and vote at the company’s general meetings, you need to choose that particular share. B and C shares are those that are to a greater extent owned by private individuals.

A preference share is a form of share that has preferential rights, which gives a dividend before the ordinary shares. These, unlike ordinary shares, often have a predetermined dividend amount.


Leave a Comment