Stocks and Shares

A company which is listed on a stock exchange such as the London Stock Exchange or the New York Stock Exchange can have their shares bought by members of the public, companies, financial institutions etc who will then own a percentage of the company depending on the number of shares they buy. The primary reason for purchasing a share of the company is the hope that it can then be sold at a later date for a greater value than it cost to buy it. Investors may also purchase shares in a company which pays out a regular dividend (a certain amount per share) which will serve as a source of income, on top of the amount that the shares can then be sold for in the future. Purchasing stocks and shares with the primary goal of them increasing in value is generally known as growth investing, whilst buying shares that may not appreciate in value much but will pay out a healthy amount in dividends over time is known as income investing.

As well as to make a profit, shares may also be bought by an individual, group or other company who wish to take control of that company. With shareholders entitled to vote on proposed company resolutions, if they have a large number of shares they may be able to get the outcome they want, whilst having over 50% of the shares in issue will mean that nobody can vote down their proposals. Even without taking control, large shareholders can influence management decisions and the direction of the company due to the number of votes they have and the potential damage to the share price they would inflict if they were to sell their shares on the stock market.