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Investing in Shares

Although the stock market suffers from ups and downs, history shows that it is the best place for your savings over the long term. So if you are happy that you have enough accessible money to fund your short-term needs and you have money left over to save you could consider investing the surplus in the shares. Learning about the stock market takes time and there is no guarantee that you will make money - even the most experienced investors get it wrong. So you need to think carefully about the risks involved and if you are able to lose hard-earned cash. If you don't want to take the risk of direct share investment, you could invest in a collective fund such as an investment trust, bond or OEIC.

The benefits and risks of investing in shares When you invest in a business it reinvests the money to help the business grow. If the company can improve its profits, demand for its shares will grow and the share price will rise. This type of company is known as a growth stock, which means your investment will grow, but you won't get any income. Some companies pay a dividend - these are known as income stocks. After deducting costs and reinvesting in the business the company will divide up what is left over and give it to the shareholders. Companies can return money to shareholders in other ways. They may, for example buy back the shares, which will increase the value of the shares still in circulation.

For more information, contact your financial adviser. You may already own shares as part of company privatisations. If so, you'll know that share ownership is pretty straightfoward. But you may want to add to those shares to build up a portfolio. If you decide to take the plunge, you need to begin by understanding what shares are how the stock market works. What are shares and why invest? There are several different types of share you can buy, including bonds and gilts, warrants and preference shares. The most popular type is the ordinary share and these give you the opportunity to share in the success of the company you invest in. When you buy shares - or equities - you become part-owner of that business and in return for risking your money you benefit from the potential for income and the growth of the money you invested if the business is successful. Companies range from large corporations to small, unknown companies. As a shareholder you have the chance to vote at company meetings and have a say in how the company is run. If it does well, the value of your investments should rise, but if it does badly, your share will fall in value.