There are several reasons people invest in the share market, however, the primary reason is to generate wealth. This can be achieved in a number of ways on the share market, through either the potential capital growth of the share price purchased, through dividends paid by the company to each shareholder for each share held as a percentage of the profit generated and sometimes a combination of both.
In Australia, shares can be bought and sold on the Australian Stock Exchange (ASX) through online trading platforms – such as CommSec, IG Markets or CMC Markets Stockbroking – once a CHESS number has been set up with the ASX.
The CHESS number or Clearing Houses Electronic Sub-Register System is part of an integrated system that settles trades made and exchanges the title or legal ownership of those financial products for money. The CHESS transfers the title or legal ownership of the shares while simultaneously facilitating the transfer of money for those shares between participants via their respective banks.[6]
By investing in shares on the ASX you are buying part ownership of an ASX-listed company – usually, minimum investments can start from as little as $500 – you can enjoy and be a part of their performance for your personal gain (or loss).
If the company performs well, as a ‘shareholder’, you can enjoy capital growth of your ‘asset’ in the form of a share price increase, as well as dividends paid out of the profits generated – that is not being reinvested in the company for future growth opportunities.
Meanwhile, if the share price movement is backwards, unfortunately so does your investment. As a ‘part-owner’ of the company, you have to work with the good, bad and sometimes ugly of being a company owner.
[6] https://www.asx.com.au/documents/research/chess_brochure.pdf