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What are shares and how do they work?

The rundown

• Buying shares makes you a shareholder, which means you purchase a part of a certain company when you buy a share.
• Investing can help you grow your wealth as shares may increase in value over time.
• As a shareholder, you may receive dividends (regular payments) from the company’s shares you own, providing an additional income stream. 
• Investing comes with risks that are sometimes beyond an investor’s control, such as current affairs or conflicts.

What is a share?

Shares are a way for companies to raise money for the operation of their business. When you buy shares, you're purchasing a part of that business. Shares are also known as equities, securities, or stocks, and are bought and sold through exchanges, such as the Australian Securities Exchange (ASX), Nasdaq or the New York Stock Exchange (NYSE).

Why invest in shares?

Buying and selling shares could help you grow your wealth through:

1. Increasing in value: Shares can increase in value over time (capital growth), allowing you to sell them for more than you paid.
2. Additional income stream: Dividends are payments made to shareholders from a company's profits.

Investing vs. trading

Investing and trading are different. Investing is the act of buying shares (or other investment types) to grow your investment portfolio over time (this could be over weeks, months or years). Trading is the buying and selling of shares on a regular basis (often daily) to profit from small price changes.