How to get benefits from shares?

 “Are you applying for the Century’s IPO?” as I asked one of my friend he replied “Is my Rs. 1000 will be Rs. 10000 after one year?” I said “no”. Then he as well replied “so what is the worth of applying for these shares? I am not applying”. This is only the example that how peoples are expecting from shares or how people are unknown about shares. Although my friend is not applying for high amount, if he has applied as well but he has expecting high return from shares in one year. Generally the investors who are investing through secondary market have well knowledge about shares and they are investing in capital market after at least minimum analysis. But the people who are investing in shares through primary markets generally don’t have the knowledge about shares and how can get benefits from shares and how much they can earn from shares. Most of the people have heard about shares from news, newspapers and friends who are investing through the primary market. They are not regular investors and are not investing huge amount as well. But they have misconception about shares. They are watching towards the regular investors and the huge investors who are getting high benefits or return through the investment in capital market. They don’t have knowledge about how they can get benefit form shares but they know they know they can get high return from shares and they know it will be good for them to invest in shares. They don’t have knowledge about risk associated with shares. They don’t know about their investment may give negative return. They don’t think that their company may go on loss or the share price may decrease and their investment may be collapsed. That means they only know positive returns but they don’t know about negative returns.

              So here I am trying to explain how we can get benefits from shares for those new investors who are like my friend, who don’t have  knowledge about shares but  they only know that it will beneficial for them to invest in shares. But it will be equally beneficial for all investors either old or new.
               Firstly the common method to get benefit from shares is receiving dividend. If you purchase the shares of those companies which are in good condition and are earning high     profit, generally distribute dividend to their shareholders. So from here investors can get return. The dividend distribution is decided by BOD of the company. It may be high or low, which is decide by BOD on the basis of their earnings, investment opportunities and liquidity position of the company etc. You can see my previous post to know how dividend is decided from here.

             Capital gain is another method through which investors can get benefit. If the share price of the company whose shares they bought has increase, than there is a chance of high earning as capital gain. They can sell their share in the secondary market in high price then they have purchase it. For this you should collect regular information and keep in contact with brokers so that you can sell your shares in high price when other person offers high value.
               Borrowing or getting loan is another means of taking benefit from investment on shares. Investors can borrow money by using the shares as collateral. It is generally beneficial for the big investors as banks and finance companies provide up to 50% of the market price of the shares. So that they can invest it again in other securities that promise more certain returns as well as growth.
                   So before investing in the share, you have to think about how to get benefit from shares. You have to make your objectives of investing in shares before purchasing it. That means you should already decide whether you are getting benefit as dividend or capital gain or loan borrowing? So you will not have confusion on your further investment. But determining objective may depend upon the financial condition, market value of shares etc. of the company whose shares you purchased as well.


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