Risks and Rewards of Investment in Shares
Studies have shown that in the long run investment in shares has provided greater returns than most other forms of savings. Buying shares can offer advantages over saving in deposit accounts: the investment may increase in value besides getting dividends. An investor shares the rewards when the company does well and the price of the shares goes up. But if the company performs badly, the shares price may go down and the value of the investment will be reduced. Other factors, such as the performance of the stock markets as a whole and the general economic climate, may also affect the price of the shares.
Investment in shares is therefore investment in “Risk Capital”. The shareholders can be rewarded for taking the risk and the potential return on their money can be higher than that on other investments. An investor can reduce risk with careful planning.