So in this short post, we will very pretty much focused on defining what shares are and maybe give an overview that would give you some head start on your education on shares.
Before we go straight to the definition, let’s establish the reason why the thing call shares exist.
You see, big companies like Bank South Pacific (BSP), Oil Search Limited, New Britain Palm Oil Limited, City Pharmacy Limited, Steamships Trading Limited and many more others listed on Port Moresby Stock Exchange (POMSoX) as well as other not listed require so much money for their operations.
Sometimes, a company may wish to expand its business and require extra money to do so. In some instances, a new business may wish to raise more money for its operations. Either way, be it an expansion of an existing business or a new business needing capital to boost growth, large amount of money is required.
You may be wondering, how these companies get those huge sums of money to fund their operations. Well! Buckle up cause you will soon discover where SHARES fit in this puzzle.
When a company is in need of additional capital, there are generally two ways it can raise the capital. One is by borrowing money from financiers who then ask for something in return for providing their money to the company who asks for money.
The other method, which is of interest to us is by selling shares. Shares? Yes. You head us right. Shares.
Both methods, borrowing money and selling shares have their own advantages and disadvantages but we won’t go into detail on that as the focus of this post is to define shares and make it very clear so you don’t have to again ask the question
‘What are shares?
A share is a basic unit of ownership in a company. When you buy a share issued by a company, for instance BSP, than you are a part owner of BSP. For instance, if you bought 100 BSP shares, then you own 100 units of BSP at a given market price. If one basic unit of BSP ownership or share is sold at K7, and if you bought 100 shares, than you would have spent K700 (100 shares X K7 per share). If the price declines, you lose money. If the price increases, then you make money on your investment. When to buy and sell your share is a very personal choice.
The companies that you can buy shares from are called Publicly Listed Companies and are listed at POMSoX.
Like POMSoX, there are other exchanges all around the world where thousands of companies are listed. These overseas companies, like the local ones in POMSoX also issue shares that you can buy. You can buy or sell shares locally at POMSoX or do the same in overseas exchanges. Our advice is you educate yourself on the art of investing in share market. Read everything you can find about shares in this blog.
Once you are confident on investing in shares, buy few shares of a listed company in POMSoX. Go through the buy and sell process to know how the system works. Learn also how to analyze companies and buy the ones that have future growth and profitability prospects.
When you are well versed with the art of investing in shares at POMSoX, then you can venture into overseas exchanges.
….Always have in mind that a share represents the underlying value of a company. Do you know the true values of the company whose shares you intend to buy? If you do, great. Go ahead and buy. If you don’t, you have few more things to learn before you buy. Read out brief Introduction to Value Investing that is intended to help you make an informed decision on whether go ahead straight and buy or do you educate yourself further and do your own research before taking action.