Capital market investment benefits

AS WE continue to craft our New Year resolutions, let’s quickly do a recap of the benefits of investing on the capital markets. Such benefits are not exhaustive and include the following: Higher rate of return: The securities market has its ups and downs, but a patient investor who holds stocks as a long-term investment historically earns a higher rate of return than someone who puts his money in a savings account. Always remember that the return is not guaranteed! Capital gains and dividends: Stock market Investors earn a return in two ways: capital gains and dividends. Capital gain is the difference between the value of the stock when it is sold and the value when it was purchased. Shareholders are also entitled to dividends, if declared. A dividend is a sum of money agreed upon by the directors of a company to be paid to its shareholders from the company’s profit in a given financial year. Spreading of risk and maximisation of returns: The range and variety of securities listed on the stock exchange provide investors with an opportunity to minimize their exposure to specific company risk. This is done by spreading investments across a wide selection of stocks. This benefit is also made more concrete by the use of collective investment schemes which invest pooled savings using specialised expertise that is beyond the ability of an individual investor. Participate in decision making: Shareholders have the right to attend Annual General Meetings ( AGMs), participate in its decision making and exercise voting rights of the company which they have invested in. Operating convenience: As investing in securities represent the separation of ownership from management, it therefore does not require the personal commitment of the investor for it to give a return. Investors are therefore saved the occupational hazards of careers, as opposed to other businesses that need the personal presence and involvement of the entrepreneur.