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3. Investing in Shares, Bonds and Treasury Bills
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Shares
Purchasers of shares, also called stock, become owners and have equity in the company. The more shares you own, the greater your share of ownership in the company. Most corporations offer two types of shares - ordinary or common shares, and preferred or preference shares.

Purchasers of common shares become owners “in common” with other shareholders, and are eligible to vote in the election of directors, and to receive a proportionate but unspecified claim on the company’s profits. Profits are usually distributed as dividends declared periodically by the company’s directors, and paid out as either cash or additional shares. Dividend payments vary in proportion to the level of profits. When the company does well, you will be able to receive a portion of its profits. But, on the other hand, the company might not in fact pay dividends in those years in which it makes little or no profit.

Holders of preference shares are entitled to certain rights and privileges over ordinary shareholders. They have the right to receive dividends at a fixed rate, prior to the payment of dividends to ordinary shareholders. If the company fails, goes bankrupt or is liquidated, preferred shareholders can receive a proportionate share of the company’s assets, before the holders of common shares. However, they do not have voting rights.

All shareholders derive three main benefits from investing in shares. These are:
   (i) Growth in the value of shares over time, with the shares being worth more than the price paid for them. This is called capital appreciation.
   (ii) Income, in the form of dividends, and
   (iii) The opportunity to participate in the development of local enterprises, at the same time contributing to and benefiting from the growth and development of economy.
But there is an element of risk in every investment. So, although the value of stocks usually increases over time, this may not always be the case. Factors such as poor company performance, bad economic conditions and unfavourable investor perception of the company could result in decreases in the value of the stock.

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