Some Basic Tax information regarding Stocks and Shares
Basic Tax information about Stocks and Shares
Stocks and Shares
If you're thinking about investing in stocks and shares but aren't quite sure where to start then our Website may be just what you need. We provide tips, information and interesting ideas on what's happening on the stock market, insights on how to reduce fees and costs and the best ways of dipping your toe in the water.
Buying shares doesn't have to be complicated and the latest internet services have driven down costs and made it so much easier to track you portfolio online.
If you’re new to all of this and have wondered just what stocks and shares are, then you’ll find the answers here in our Website along with a range of help and guidance to give you the information you need to make your first investment. Let’s firstly explain about Stocks and Shares and their purpose. The words stocks and shares are used interchangeably by many people but shares refer to a share certificate or ownership portion of a particular company and stocks would normally refer to shareholdings in a range of companies or a portfolio of shares. A simple example may help on shares and share prices. A businessman wanted to start a new enterprise and required £100,000 but didn’t have the capital to do so and decided to divide the company into 1000 pieces or shares. The price of these shares is £100 each and he asked 100 friends to buy 10 shares each. This secured the £100,000 he needed to start the business. The enterprise subsequently proved successful and another company wished to purchase the new enterprise and was willing to pay £200,000 for it. The value of the shares was consequently worth twice as much as the original investment. Hence each share is now worth £200.
Types of investment
Shares are one of the four main investment types, along with cash, bonds and property. There is an associated risk with investing in shares, but they can offer the highest returns. Buying shares in larger, established companies can pay you dividends but the growth of the stock price might not be as rapid, however the income gained from dividends can be reinvested to grow capital. Diversifying is a smart way to invest since you are spreading out the risk that you take when buying shares in a company.
In order to begin the process of buying and selling shares that you can own yourself, there are a number of ways to go about this. You can use a stockbroker, an online broker or a financial advisor, who will however ultimately have to go through a stockbroker. One way of investing in shares without committing large sums of money and an excellent way to start investing if you’re new to it is Penny Shares and it’s one of our specialities.
Penny Shares enable low cost investment at entry levels that many people can afford. The format allows you to test the water and there can be significant gains to be had, although it can be high risk.
Penny shares are common shares of small public companies that trade at low prices per share, generally less than £1 per share in the UK. These stocks can present a high risk for investors as they are volatile, they can also be hard to sell, if no one wants to buy them and you can find yourself stuck with the shares. They trade on the Alternative Investment Market and the Plus Quoted Market, as they aren't listed on the London Stock Exchange. There can sometimes be less information available, so it can potentially be difficult to predict how well the business will perform and hence assess what the share price will do.
A novice in penny shares could be forgiven for not realising that a penny fluctuation in a low price share could be hugely significant. For example a share priced at 10p on the AIM (Alternative Investment Market) which changes by 1p on a single days trading is equivalent to a 10% effect on the original investment. With the high risk of investment a lot of customers use a Stockbroker to advise them on their investment choices and opportunities.
Using a stockbroker
A stockbroker buys and sells shares on behalf of a customer. Using the services of a stockbroker is very popular as they have the inside knowledge on what is hot and what is not in the investment world. Stockbrokers charge a commission for their services most of which is now done through Online Trading.
Online trading is the concept of buying and selling shares or options for financial gain via online trading platforms. This type of investment platform reduces significantly reduces paperwork, is more efficient and consequently reduces cost to the customer and broker. This system of trading has become increasingly popular over the last 15 years due to technology innovations and widespread internet access.
Always remember values can go up and down
Investments can be risky with the opportunity of big wins and equally big losses depending on many different factors. Situations in which values of stock can go up may be due to a takeover of the target company or an innovation which is likely to increase demand. Values can go down just as significantly for example if the competition has developed a product superior to that of the company you have invested in. One way of minimising swings in your overall portfolio is to diversify your stocks. Having investments within different sectors helps avoid serious risk taking. ‘Putting all your eggs in one basket’ is a dangerous concept in the stock market. If you have all your investments in one area then you could be at serious risk of financial loss.
Trading forums and Investment groups
Trading forums and investments groups are online areas where individuals either novice or expert come together to discuss the latest events or trends on the stock market. People use this facility to gain information on what to invest in or what stocks to stay away from. It can also be used to find out the latest news, current events trending and give a greater depth of knowledge on what to invest in.
There are two main reasons why companies go bankrupt. One is through lack of profitability and the other is through lack of cash. An important point here is that there are many instances of profitable companies that go bankrupt because of lack of cash and so in reality cash is the crucial element.
Company insolvency is defined as the point where a company cannot meet its debts as they fall due or if the value of the company’s assets is less than its liabilities. Bankruptcy action can be precipitated either by the directors of the company or by any of the creditors who are owed more than seven hundred and fifty pounds, the liability on which is not disputed and a formal demand has been made for the debt to be paid.
There are many small businesses in the UK which are not formed as limited companies where the owners have either formed a partnership or operate on a sole trading basis or are self-employed. In these instances the debts of the business can become the personal debt problems of the owners. This can mean that even when they close the business they may have to find ways of repaying the outstanding debts and for some this can mean having to consider formal debt solutions.
This can be a first time experience of debt problems for many small business owners and they often need professional debt advice to advise them of the options available. These can include borrowing to pay off what they owe but can also mean personal insolvency options such as an IVA or bankruptcy. This personal liability of business debts can also extend to limited companies where the directors have continued to trade and take on debt when the company is insolvent.
Company bankruptcy therefore affects many people including suppliers, employees, directors, owners and shareholders but with over fifteen thousand company liquidations in England and Wales every year it is a fact of commercial life.
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