Shares

You may have read in newspapers and magazines about "wheeler dealers" in the City of London who make massive amounts of money from dealing in shares. Buying and selling shares is an investment opportunity that is open to all, although it should be noted that the best investors know that shares offer a long-term investment opportunity.

To start at the beginning, let's take a look at what a share actually is. A share is effectively a small unit of a company - ownership of this small unit means that you own a 'share' of the company as a whole. For example, if a company is worth £1 million and has 1 million shares available, then each share would be worth £1.

The value of shares fluctuate and the increase (or decrease) in the share price of a company will mean that the total value of the company will similarly increase or decrease.

Why do shares go up and down in value?

We wish we knew! A share price is mainly dictated by supply and demand - if lots of people want to buy a share in a company but very few people wish to sell shares in that company, then we would expect the share price to rise (and vice versa).

However, things aren't quite that simple. It's not always easy to see why some shares are suddenly found to be in such great demand - often people wish to buy shares in a company because of an expectation that the company will be very successful in the future, or because the company has a good track record.

There has been an enormous amount written about 'systems' that enable investors to pick shares that are likely to increase in value. These systems vary in their success rate - an example of one such system is outlined in 'The Motley Fool UK Investment Guide'.

How do I start trading shares?

There are various ways to get started investing in the stock market: on our following free share guide pages we have guides to stockbrokers, investment trusts, Basics of investing in shares, unit trusts and ISAs.

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