People who wish to gain exposure to an asset that has capital growth potential although volatile and income. A share is a unit of ownership in a company. It may be a listed company that trades on the stock exchange or an unlisted company. A listed share is usually very liquid, which means that there is a buyer at the market price. The price however is volatile and goes up and down with market sentiment and the fortunes of the company.

disadvantages of buying shares in a public company

The shares in an unlisted company are not very liquid. You need to find someone who wishes to purchase your shareholding. It may be difficult to determine what is a fair price as the shares are thinly traded and there is little public information.

What are the Disadvantages of a Public Company?

You may buy the share of a domestic company or you may be able to also buy shares of overseas or international companies. Buying shares in an overseas company are often through managed or mutual funds. There is the added currency risk in purchasing overseas shares although the currency risk may be offset by currency hedging.

You normally own a share in a limited liability company so that you are not personally liable for the debts of the company although you are at the bottom of the pecking order if the company fails, as other interests such as the tax office and creditors are paid first.

What are the benefits? As a shareholder you receive the benefits of the capital gain in the value of the company, which you may realize upon the sale of your shares. You also receive the dividends that are usually paid twice a year, as well as access to rights, bonus shares and share buy-back schemes that may be offered. Other minor benefits are that you are entitled to attend and vote at the company general meetings and sometimes you may participate in shareholder benefits such as discounts on the products of the company.

If you own the shares direct and not through a managed or mutual fund, there are no management expenses. It is difficult for the average investor to know when to buy the share good value? One way to have the advantage of share exposure without the need for a great expertise is to invest via a managed or mutual fund.

If you wish to gain access the whole of a sharemarket or a sector within a share market with minimal expense than an exchange traded fund ETF is another option.

Record keeping for direct shares can be difficult, especially if you reinvest the dividends. There are software programs that assist you in record keeping. If you trade or hold your shares through a stockbroker or other administration service you may also receive benefits of recording keeping.

Shares - Benefits and Disadvantages by Barry Lizmore

Remember that shares are volatile investments and if the company does fail you are the last to receive any remaining capital after expenses have been paid. Diversification within a selection of other shares and asset classes is the key to manage this risk.

This is an amended excerpt from Financial Planning A to Z, to be published in late Refer my website for more details. Articles of a similar nature will be posted at the start of each week. Barry Lizmore is a financial planner in Melbourne Australia and is a lecturer in financial planning at Deakin University. I have recently written a book, "Take Control of Your Money" which explains the financial planning process and answers questions such as: What is financial planning?

What can a financial planner do for me and how much can I do for myself? What questions should I ask a financial planner? How much should advice cost me and how do I know if I am getting good advice?

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How can I determine my lifestyle and financial goals? How can I reduce risk? My educational web site which includes information on my book is www. How can I de CLICK BELOW TO WATCH THE VIDEO Shares - Benefits and Disadvantages Who can benefit? I dont know when to buy and when to sell my share so may you assist me please. Barry Lizmore 27th December 3: This is tough one as there are so many factors.

Do you need the money? Has there been a loss or a gain on the shares? If there has been a loss can you claim it as a tax deduction? If there has been gain will there be tax and should you wait until a low tax year to sell?

Is the price likely to go higher? Would you invest elsewhere? My own view is that if I have made a good profit and the taxation is not too bad locking in the profit by selling is not a bad option. Natalia 31st January 6: Dolyk Zeiher Co L P A 17th August I was reading for this article for about a 5 mins and it is really worth of time I spent I learn something new to this post Thanks again.

Barry Lizmore 24th August 4: I have not written any further articles for sometime however you may have sparked an interest to get back into it. Josephine kumah 10th March How is it possible for a shareholder who receives small percentage of income get more profit whiles his money invested in the business is small.

Barry Lizmore 12th March 6: There is no magic solution to get more. At the end of the day your total profits are the dividends you receive each year and the capital gain you get when you sell the investment. The basic rules are to be patient, diversify across a range of investments and don't expect huge profits.

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