For several individuals, the stock market still remains a mystery and a complicated area. They are aware of its existence and know that some people make a lot of profits from their investments. However, if you are aware of the basic concepts of the UK stock market, investments are simple, and you can make informed choices that will fetch you returns from the investments they make.
Kavan Choksi– an insight into the stock market
Business and investment expert Kavan Choksi states that when it comes to the UK stock market, you should first know what it means first. It refers to a collection of markets where company stocks are traded between the investors. It generally refers to the stock exchange where securities are purchased and sold. These two primary exchanges in the United Kingdom are the Alternative Investment Market (AIM) and London Stock Exchange (LSE).
How does the UK stock market work?
When you purchase shares in the company, you become a partial owner of the organization. When the price of the share increases or reduces depending on how well the business is doing. If the organization makes a lucrative profit as the price of the share increases, however, if the company fails, the costs of the shares will reduce.
Reasons people invest in the stock market
Individuals invest in the stock market for two key reasons- to build wealth and to safeguard their savings. When one puts their money in a bank account, it is safe from the impact of inflation. However, when time, inflation eats away at the savings you make. This is why most people select to invest their funds rather than keep them in the bank. This means if they choose the correct investments, they can make more money than they could by investing it in their savings account.
Being aware of the risks of the UK stock markets
However, there are certain risks that are involved with the UK stock market, and this means the value of your investments can either increase or decrease. At the same time, you can lose some or even all of the original assets you make. Even though there are risks when it comes to investing in the UK stock market, you can still make a lot of money. Moreover, you can protect your savings from the ill effects of inflation.
Business and finance expert Kavan Choksi states that the only way for you to make money from the UK stock market is via dividends and capital gains. The latter takes place when you sell your company shares for more than you have paid for. For instance, you might have purchased shares in ABS Plc for five pounds each, and the business of the company‘s performance does well. The price of the percentage increases to ten pounds, and so if you sell them, you can make a profit of more than five hundred pounds.
Dividends are those payments made by the organizations to the shareholders from their company profits. They are generally paid every year, and there are some organizations that pay them quarterly or twice.