Share returns: types and opportunities

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Many novice investors, and just people who want to improve their horizons or financial literacy, are interested in stock returns. However, before answering the question, it is important to give a few definitions and understand what is at stake.

What is a promotion?

The simplest and most common definition of this concept is that it is a special type of securities, which is evidence that an investor (shareholder, owner of shares) has any share in the enterprise.

Why is this needed? This has happened historically, because large organizations need additional funding, which they receive by selling securities. In this way, firms attract new funds, which allows them to make even more transactions and achieve even more turnover. It turns out a kind of vicious circle, thanks to which organizations use additional funds.

Why buy them?

Many readers will probably ask this question. It is clear that no one will make any acquisition at a loss to himself. This is where we will talk about what is the return on stocks. For whatit is needed, no need to explain, because every potential investor wants to make a profit. However, from the moment the security is acquired, its owner is considered not only a full shareholder, but also an investor. In fact, having made any investment, you can count on additional profit in the event of an increase in the value of the acquired asset.

Share returns: types

We are not talking about different enterprises, although their securities do differ both in value and in other parameters. There are many classifications, and the most significant of them will be listed and described below.

Expected stock return. If you avoid various mathematical formulas and specific terms, then this is the approximate value of a security after a certain period of time. As a rule, investors create portfolios, and the term expected return is more applicable to them. Portfolio - a set of various securities that are acquired in order to receive income from changes in their value, it may include income from dividends and other factors.

Current stock return. We are talking about the value of the security at the moment. For example, you once purchased company shares for 10 rubles and sell them for 15, after the transaction, your profit will be 50%. However, in reality, this happens quite rarely, and the cost changes slightly. It is important to note that this type of profit is also referred to as the stock market return. Securities are often quoted onexchanges, and their price changes every second.

The stock's dividend yield. Many, especially conservative investors, like to buy securities for the long term. The shareholder is en titled to the payment, however, only on the condition that the enterprise issuing the shares so decides. The amount of dividends will depend on the average annual value of the security, as well as on the financial condition of the enterprise and, possibly, other factors. As a rule, payments occur once a year. At the same time, no one forbids an investor to sell securities if he is not satisfied with the amount of dividends, or after receiving them.

Who issues shares

They are issued by joint-stock companies. At the moment in Russia there are two types of such organizational and legal forms, namely:

• Public Joint Stock Companies.
• Joint-stock companies.

They have their differences. As for public ones (they used to be called open), they have no limit on the number of shareholders, as a rule, these firms are larger and well-provided. In the second case, the number of holders of securities may be limited by some legal aspects.

In addition, shares are issued by foreign firms. In the West, this is called an IPO. Next, we will talk about them.

Commercial Shares

Stock markets exist in many countries and sometimes cities. The largest are located in the USA, European countries, Hong Kong. In Russia, the most authoritativethe organization that carries out such activities is the Moscow Exchange (MICEX, moex).

Working with stock exchanges is very hard and costly work. The profitability of shares of foreign companies changes almost every second, and if we take longer periods, then in a week the price can fall or rise by several dollars or even more.

If we return to domestic companies, they are also on the stock exchanges. The profitability of shares of Russian companies depends on many factors, they will be discussed below.

Recommendations

Before you start working with securities, you should carefully study the specific literature, many articles and preferably legislative acts related to this topic. You may want to become a shareholder in an enterprise directly, such as a well-known local factory. In this case, you won’t have to work through exchanges, and knowing the specifics will reduce some of the risks associated with loss of value or lack of dividends. However, this does not mean that these securities will not be listed on the stock exchange; most likely, transactions with them can be made there as well. In general, the area of investment can become an attractive source of additional income.

Results

Thus, the reader has learned what stock returns are and what are its types. In addition, the topic of exchange trading, work through stock exchanges, which will require additional knowledge and large funds, was touched upon. If you still decide to invest, then it is better to study this topic in more detail onspecialized resources.