Have you ever wondered about investing in securities? I assure you that the richest persons in the world have invested their monies in various companies. They own quite a good percentage of shares in companies. They have preferred this type of investment because it is stress free. It does not need their day to day management.

It is the smartest source of income dividends and interests because you will not be working for money but your money will be working for you. There are many types of securities that are offered by various companies to the public for subscription. But today, let’s talk all about shares.

Shares are the ownership type of securities. There are many benefits you derive from them apart from dividends such as; they act as one way of saving your money for future requirements, you can use them as security for securing loans from financial institutions and lastly they are high liquid assets thus you can buy them at low prices and sell them at profitable rates become a speculator.

So what is a share? It is a unit of ownership in a company because when you buy them, you own part of its capital which is the live hood of the company. To be a smart investor, your investment purpose should be coupled with safety. You have to buy the right choice of shares from the right company. Why do this? Well… it’s because you want to ensure: (a)frequency and justice dividends (b) to ensure that you invest in a company that is productive with good management (c)  that you protect your interest.

Here are the types of shares that you can invest your savings in:

Generally they are classified into two broad types.

1. Preference

These are the ones that carry privilege rights with regard to payment of dividends and return of capital compared to other types of shares. The categories of this type of shares are:

Cumulative Preference Shares-Under this, the amount of unpaid dividends will be carried forward as arrears and will be paid in the following year before any dividend is paid to equity shares.

Non-Cumulative Preference Shares-They receive dividends all the years and in case the company does not make any profits to be declared as dividends, then this category of shares will not be paid any arrears of unpaid dividends in subsequent years no accumulation of dividend.

Participating Preference Shares-They are paid fixed rate of dividend and they also receive surplus of the net profits after all other payments have been made.

Non Participating Preference Shares-They only receive a fixed rate of dividend without any payments of surplus in the net profits.

Redeemable Preference Shares-In accordance with their terms of issue, they can be redeemed at the discretion of the company.

Irredeemable Preference Shares-They cannot be redeemed at all during the life time of the company.

Convertible Preference Shares-They can be changed to equity type of shares within a fixed period of time if there is such option in the company.

Non Convertible Preference Shares-They cannot be changed to equity type of shares.

2. Equity also Known as Ordinary Shares

This type of shares is the one that make investors to be the real owners of the company. They are referred as real ownership of the company because they carry voting rights thus the investors are able to control the affairs of the company once they buy them. They do not have preferential rights in regard to annual payments of dividends or the return of capital in the course of winding up of the company.

They have high risks in that if the company does not receive profits, they will not also receive any dividends. Due to their high investment risks, they are rewarded high dividends in boom business period during which the company makes high profits. They are also entitled to company’s assets in the events of its winding up.