Shares

Share dilution is a reduction in earnings per share of common stock, occurring when additional shares are issued. Common shares increase during a secondary market offering, when employees exercise stock options, and when convertible securities are converted.

Investors want share prices to go up, so the capital value of their stock portfolio increases. Share price rises in stocks are also appreciated by share traders who are trading long, individuals who have superannuation or own a portfolio of shares. And if they've followed the basic rule of buying low and selling high, they would easily gain a profit from their share trading or an increased portfolio value. Having the share price go up is great for investors as it allows them to follow the basic maxim of buying low and selling high.

What does it mean to invest in shares?

You are probably wondering what are shares? A share is simply part ownership of a business. If you invest in shares, stocks, securities or equities – as they are sometimes called – you are buying part ownership of the company’s business and become a shareholder in that particular company

Obviously you then have a vested interest in the fortunes of that company and hope the business will grow and prosper, together with your equity in its future. If it does then you may get to share in its profits. These profits are paid out in dividends and are your reward for investing with the company.

Many people dabble in stocks nowadays, whether it be investing or online share trading, you are in it for the money. The difference is in how the money is made: an investors' goal is for capital growth in the long term and an income from dividends while a share trader looks at making money purely from capital growth, typically in the short term.

I've long wondered why some companies that are listed on the Australian sharemarket have the NL suffix to their company name. What does N.L. mean? A company name must indicate the company's legal status. A proprietary company must include the word 'Proprietary' or the abbreviation 'Pty' in its name. A company must also indicate the liability of its members in its name:

• if the liability is limited, the company name must end with the word 'Limited' or the abbreviation 'Ltd'

What is share trading? Of course you may say - the answer is simple: "Share trading is the activity of actively trading shares in the view of making a profit". Simple wasn't it? Well, case closed, we can all go home now. Well, I want to probe into what share trading really is in reality, not some non-sensical theory that seems impractical in the real world. Sure, the laws of supply and demand rule the markets, but what I want to discuss is what share trading means to the retail trader: traders like you and me.

How are the number of shares a company has determined?

Bill Gates is said to have a billion shares of Microsoft stock...of course since he owns the company and at roughly $25 a share he is a billionaire. But this is only because someone has detemined that Microsoft has over a billion shares. How do they get that number?

The number of shares is determined by the number of stocks issued at IPO and any other further offerings after the IPO depending on the companys' needs.

How do I figure out how many shares of a stock can I buy for any given amount, without actually buying them?

The answer is by using simple mathematics.

First you need to decide how much of each stock you are going to buy - since not all stocks are priced equally some would be $20, other $400 and some 0.05 cents.

$100,000 over ten stocks... Decide what ratio you will hold of each stock. E.g. 6:3:4:1:9:4:3:7:9:2

So totalling the ratio is 48. Now you can use a combination of the ratios and fractions to find out how much stock you can hold with your $100,000.

Can I purchase stocks on my own or do I have to use a broker or an online trading company?

You can acquire stocks in the following manner:
1. Gift - they are given to you as part of your salary or Christmas present.
2. Dividend reinvesment plan
3. Direct on-market purchase through a broker
4. Sometimes from the company if they are issuing more shares
5. If brand new company - buy shares from IPO
6. Through executing derivatives such as options

If there is anymore please let me know.