Historically, stocks have achieved an average return of around 10 – 12 per cent over the long-term, and are notoriously well known for outperforming safer investments such as bonds or savings accounts. As such, having a share in the ownership of a company can be a worthwhile investment, particularly if you are willing to put your money into a riskier venture.
There are two main classes of stock: these are known as common or preferred. As the name suggests, common stock make up the vast majority of shares available and are generally considered to entail the most risk. Indeed, if the company goes bankrupt, shareholders do not receive any money until the creditors, bondholders and preferred shareholders are paid. On the plus side, being a shareowner entitles you to a portion of the company’s profits, so if the going is good, you could potentially see a significant return on your investment.
By owning stock(s) you are also entitled to one vote per share when it comes to electing the board of directors at annual meetings. So while having shares doesn't give you any power in the way the business is managed, your voting rights means you do have an opinion in who is in charge, and by association, the direction of the company.
Preferred stocks, however, don’t usually afford the shareholder the same rights, so if this is important to you as an investor, it is crucial to choose ventures that do allow you to vote. The other aspect to take into consideration is the way in which the money is paid out – unlike common shares, investors are usually guaranteed a fixed lifetime dividend, which could be ideal if you are looking for a safe, consistent income for retirement. When deciding upon which type of stock to invest in, it is always worth considering the option of a collective investment scheme. This is where shares are pooled into one investment to maximise returns and minimise tax.
There are innumerable different companies that you could potentially invest in, so before you make your move, take the time to shop around. And, if you are looking to make a much larger investment, you could consider taking over a dental practice. Indeed, if an incorporated practice is looking to sell, it will usually do so through selling their stock – as more often than not the principal owns the majority, if not all of the shares. By buying these shares you take over as the main owner of the practice, which holds numerous opportunities.
All in all, there are a number of roads to go down with shares, which if you play your cards right, can pay dividends – literally! To get the most out of your shares or for advice on buying or selling, it is best to seek guidance from an Independent Financial Adviser, such as those at money4dentists.
There is a lot to consider when trading shares, so make sure you are prepared – getting caught out will cost you.