A share is a unit of ownership in a company. In other words, when you buy shares of a company you become part owner of the company and have the rights to share from the fortune of company and contribute to major decisions at the Annual General Meeting of the company.
What are the benefits of investment in shares?The benefits are numerous, however I will mention just a few:
1. COLLATERAL: It serves as collateral, whenever we need loan from the bank. It is easier to use as collateral than using buildings. No need of certificate of occupancy, no need of evaluation by estate valuers. By looking at your shares certificates or CSCS statement, the bank manager knows the value of the shares and you also know. Shares are the most preferred collateral security because of its liquidity.
2. DIVIDENDS: As a part owner of a company, you are entitled to dividends. Dividend is a cash reward made by a company to its owners out of the profit made at the end of a financial year. The amount of dividend received is determined by the volume of your shareholding.My mother used the dividend she received between 2000 and 2003 to build 2 units of 3 bedroom flats in Lagos.
3. BONUS SHARE: This is similar to dividend but it does not involve cash payment. When a company gives bonus shares, it means every shareholder is entitled to additional free shares. N3500 used in buying 1000 units of First Bank shares in 1993 have grown to over 54,000 units valued at almost N900000 in 2013 due to bonus shares and growth of the company.
4. CAPITAL APPRECIATION: Shares of companies may appreciate due to the forces of demand and supply, growth of the company, management competence or growth in the economy.
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