How Does Share Trading Work
 

How Does Share Trading Work

The apparent reason to buy shares is to make money. One might as the question; how do shares work? In brief, there are two ways of making money, through a rise in a company’s stock price and dividends paid out to shareholders. A stock dividend is the payment you will receive from the company you are investing in. The company pays the dividend from the profit it generates throughout its financial year. As a result, if the company fails to make a profit, you are not likely to receive dividends.

How do shares work and why do we buy them?

Financial returns

You can realistically make a 50%+ return a year on your capital, this compared to the interest rate offered by banks are often around 1-7%, which is a huge difference. Investing in the stock market is often a major reason why the rich are rich because they grow their money faster than other people who simply let their money sit in a bank account. However, it is easier said than done, getting 50% return on would require a good education in trading stocks, here is a financial example.

Example

  • You have $20,000
  • 3% interest from a regular bank savings account would give you $600 a year.
  • A 50% return from the stock market would give you $10,000 a year.

Beating recession

You can make money when the market is going down. This is achieved by a great concept called shorting. You most definitely can not make money with property when the market is in recession. This concept is whereby you first sell something that you don’t actually own, so you are actually borrowing the share and paying interest on the borrowed share. Then you will ultimately buy a share to repay the borrowed shares to your broker. So, you are buying and selling shares, but you are simply doing so in reverse order.

The lifestyle

You can literally work for yourself at home. No pressure from the boss, no orders around and you don’t have to deal with anyone else’s problems! That’s four reasons right there…

Where to start trading shares

Start trading with a local (South African) trading platform today. Easy Equities offer a fully managed system. This is whereby you let professionals handle your EasyEquities Share Trading which is tailored to specific risk profiles, including aggressive, balanced, moderate and conservative.

 


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