Share Prices Explained
When developing an investment portfolio, many of us will look to a range of traditional and well established investment products.
A well trodden investment path is the purchasing of shares. Whilst this is a common form of investment, it does come with inherent risk and in this article we will explore what shares are, how they work and how the share prices are determined.
What is a Share Price?
A share, or stock price is the given amount that it costs to buy one share in a company. In general the price of a share is not fixed, but fluctuates according to market conditions and shares can be bought from a wide number of publicly available platforms.
The price of a share is subject to a number of factors, including market volatility and conditions in the given sector at that time. Given the level of market fluctuation it is always advisable to take expert advice but many platforms today will allow you to practice simulated trades prior to investing your own capital.
Determining the Price of a Share
Following a company’s initial public offering (IPO), an initial share price is set according to a projected supply and demand of the company stock.
Following an IPO the company share prices can be impacted by a range of factors including the volume of shares, overall market supply and demand as well as key team and personnel changes, and geopolitical events.
When selecting a share portfolio, it is also important to assess the market and follow events in that particular sector closely. An experienced broker will be able to manage your portfolio on your behalf and suggest either a sectoral or mixed share approach, but with the right industry monitoring, knowledge and a fundamentals analysis, you can also effectively manage you own share portfolio.
There are also several reasons that companies want their share prices to rise, for example, a high stock price can bring both prestige and also work to deter takeovers as well as generating strong revenues. As an additional incentive to company shareholders, many companies will offer shareholder dividends as a financial incentive to stay with the company.
Any sensible investment is worth exploring and shares provide just such an investment – they are popular and there is a wealth of information available to make an informed decision before investing.
Please note that share prices are liable to fluctuation, and you may lose moneys invested if the price of a share decreases. Please always take professional advice before investing.
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Please Note: All information, references and dates included in this article were accurate at the time of publishing.