A company is a legal entity created in terms of the Company’s Act. The purpose of a company is to conduct business along the lines of its founding documents with the aim of making profit for the benefit of its shareholders. Shareholders hold shares in a company, which represents their co-ownership portion of the company.

When a company needs money to start or expand the business, one way of raising the money is through the issuing of shares. When one buys a share, one is actually buying a small part of that company and thereby becoming a part-owner called a shareholder. The company may decide to share the profits with shareholders in the form of dividend payments and as the company grows in value, the value of the shares should increase as well, until the shares are eventually sold for a profit.

The goal is simply to make money. These are some of the main advantages:

• Capital growth: Shares have the potential to grow quickly in value.
• Income generation: A company may decide to pay dividends to shareholders.
• The ability to spread risk: Through purchasing shares in different companies.

A Stock Exchange is simply an organised and secure platform (market place) where buyers and sellers of shares can transact deals. A Registered Stock Exchange ensures the application of ethics, rules and fairness on the trading platform.

Listed shares are shares of companies approved for trading by the JSE on its trading platform and can be bought and sold by anyone on the Exchange through a registered Stock Broker. The daily share price may be viewed in the financial section of any newspaper and various websites. These shares may be traded freely on the Exchange where thousands of investors trade every day. Listed companies share prices are determined by the market (willing buyers and willing sellers) on a daily basis. Various factors (profitability of the company, market sentiment, etc.) can influence the price of a listed company’s share.

Unlisted shares are not traded on an Exchange. An unlisted share is initially offered by invitation to investors through a legal offer document, where after it may be transferred from one investor to the next by the company’s transfer secretary. When the board of directors of a company decides that it is ready and wishes to list its issued shares, it then applies to a Stock Exchange for a listing. By not enjoying the exposure of a Stock Exchange platform simply means that unlisted shares are more difficult to trade with than listed shares. Many companies listed on Exchanges today, were unlisted in their earlier days.

Traditionally, one would make use of a Stock Broker (a legal body that is authorised by a Stock Exchange who acts as intermediary between buyers and sellers of shares for a commission), to buy and sell specific shares as instructed by the investor. However, this option requires the investor to have the expertise and lump sums of money to start with. Another option is to pay a registered investment or asset manager, who has the expertise, to buy and sell on one’s behalf.

Most people understand that the goal is to buy a share when it is cheap and then to sell it for a profit later. However, most inexperienced investors do exactly the opposite, losing money in the process. This is why it is so important to not only rely on the expertise of professionals, but also to invest for the longer term instead of trying to make a quick profit.

Everything in life involves some form of risk. One cannot eliminate risk, but one can manage it.

• StratEquity offers several different risk-profiled investment options so that investors can select the level of risk that they are comfortable with.
• StratEquity is licensed to manage your investment, seeking the best investment opportunities for you, investing into and out of the right investments at the right time, according to the level of risk that you have selected.
• StratEquity will not “put all your eggs in one basket”. StratEquity primarily invests into listed companies and Exchange Traded Funds (ETF’s), making even the most aggressive investment option relatively safe.

Remember that generally, the greater the risks, the greater the rewards. It’s your choice.

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