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Imagine
a company is like a cake, divided into many slices. Each slice represents
a "share". The difference here is that everyone who owns one
or more of these shares in a company is considered a part owner of the
company. These people are known as shareholders, in other words, people
who hold shares.
As
a shareholder, you do not take an active role in running the company,
you are purely a part owner and you benefit from the profits of the company.
Other
names commonly used for share and shareholder are: share of stock, a share
certificate, stockholder, investor.
What is an INVESTOR?
An Investor
is anyone like you or me who decides to buy a share in a company. Immediately
he is considered a shareholder since he owns a share, but he is also known
as an investor; in other words, somebody who has invested money in a "share".
What is the STOCK EXCHANGE?
You should
be asking yourself; where can somebody get one of these shares ? The answer
is the stock exchange.
The stock
exchange is a place where people buy and sell shares of companies. It
might seem chaotic and undisciplined from the films you have seen. However,
it is a very complex system which allows people who want to buy shares
to meet (in person or via the computer) people who want to sell shares.
It is this exchange between the people who buy and those who sell that
determines the price of a share.
There are
stock markets in major cities across the world; e.g. London, New York,
Tokyo, Hong Kong, Paris. In London you will hear about the LSE, which
is the London Stock Exchange.
Other names
commonly used for the stock exchange are: the stock market, the market,
the Footsie (FTSE).
By
Alan Benaim (Investment banker)
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