Investing in shares has the potential to provide the following main benefits to investors:
- Regular income. To receive an income from investment in shares through a dividend. A dividend is a sum of money paid (usually yearly) by a company to its investors, usually a percentage of its profits. Some shares offer a strong dividend policy while some do not offer a dividend at all.
- Capital growth. Investors will hope that the eventual price that they sell a share at will exceed the initial price paid for the share – resulting in a ‘profit’.
- Portfolio diversification. Shares offer investors with the ability to diversify their money portfolio, accepting higher risk in pursuit of higher returns in comparison to ‘safer’ asset classes such as cash and bonds.
However, shares are not without their risks and investors can lose more than they originally invested if the share does not perform as hoped.