How To Invest In The Shares Of A Company

Investing in the shares of a company is a popular and potentially rewarding way to build wealth and achieve financial goals. 

By purchasing shares, investors become partial company owners and can benefit from its growth and profitability. 

1. Educate Yourself

Before you start to invest in the shares of a company, you need to do a  due diligence.

However, investing in shares requires careful consideration, research, and understanding of the stock market.

This article will guide you on how to invest in the shares of a company. It also highlights the benefits that can accrue to you if you invest in the shares of a company.

Learn the basics of the stock market, how it operates, and the factors that influence stock prices.

Look into the companies you’re interested in, focusing on their financial health, industry position, and future growth potential.

Related: How To Manage Your Business Finances Effectively

2. Invest In The Shares Of A Company: Set Investment Goals

Decide whether you are investing for long-term growth, income, or a specific financial goal.

Your decision should be based on your investment priorities and risk tolerance.

3. Invest In The Shares Of A Company: Research Stocks

You should research at least three companies that pay dividends regularly and have growth potential.

Many companies are quoted on the stock exchange with some in:

• Manufacturing

• Oil and gas,

• Banking and financial services

• Manufacturing,

• Construction

• And many more. 

4. Invest In The Shares Of A Company: The Stock Exchange

The Stock Exchange is a government agency responsible for handling company shares.

The activities of the stock exchange, the mark, and stock brokers are regulated by extant laws.

Related: Why Financial Management Is Important In A Business

5. Invest In The Shares Of A Company: 5-Years Financial Summary

One reliable source of information is the 5-year financial statements of the companies. 

This document contains all the necessary information and data you need. 

If you find it difficult or unable to read and interpret financial statements, you can seek help from:

• Stockbroker
• An Accountant
• A financial advisor
• A Lawyer

6. Invest In The Shares Of A Company: Benefits 

Many benefits can accrue to you if you make investments in company shares.

Below, are some of them:

• You become one of the owners of the company
• You can attend the annual general meetings of the company
• You have the right to vote and be voted for
• Where available, you will receive the dividends.
• You will be entitled to rights issue when declared
• You will receive Bonus Shares when declared.
 .You can make capital gains if the price of the shares rises above the price you paid for them.

Related: Reasons Why Working Capital Is Important In A Business

7. Invest In The Shares Of A Company: Payment Of Dividends

Many companies listed on the stock exchange  pay dividends to their shareholders twice yearly: 

• Interim dividends

• Final dividends

Some of the companies even dividends quarterly.

The final dividends are paid to shareholders at the end of the year.

Note, however, that payment of dividends is subject to the decisions, and recommendations of the Board of Directors, and the approval of the Central Bank.

For example, the directors may resolve not to pay dividends to shareholders under the following conditions:

• They are planning to carry out a major expansion program that requires a large amount of money

• They do not want to borrow from the bank

• They prefer to use the retained dividends to finance the project.

Many profitable companies pay dividends to their shareholders regularly to reassure them that the company are doing well.

Dividends encourage shareholders to remain with them and to make even more investments.  

You can invest in company shares to generate an additional stream of income for you.

8. Invest In The Shares Of A Company: Choose A Stockbroker

You should choose a stockbroker to buy or sell shares for you.

They receive some money as fees for their services.  The percentage of commission they receive is fixed or reviewed by the Central Bank periodically.

A Stockbroker is usually a qualified professional, licensed, and registered with the Securities and Exchange Commission.

He is an expert in stock market operations. He knows which, how, and when to buy or sell shares.

9. Open A Stock Brokerage Account

You should open a stock brokerage account with your stockbroker. 

This account is also called an In-house Account.

You should fund the account with enough money to invest in a company’s shares.

The stockbroker will process the documents and register your name and address with the Stock Exchange. 

A stock trading account number will be allocated to you. 

That is the account number you will use in all your transactions with the stockbroker. 

Furthermore, your name will also be registered with the Central Stocks Clearing System (CSCS).

This is the section that records and tracks all transactions in company shares.

The CSCS will allocate a trading account House Number (CHN).

10. Invest In The Shares Of A Company: Purchase Mandate Form.

Your stockbroker will give you purchase mandate forms.