Investing money as a shareholder is a way to become a part-owner of a business without assuming any leadership responsibilities. Each share you buy gives you fractional ownership. You can make money from your investment when the share price goes up or when the company pays you dividend income based on your shares owned.
Whether you are an entrepreneur or simply interested in business investments, you have several options. A sole proprietorship is the simplest business arrangement where you start and operate a business yourself. Partnerships are legally formed companies where multiple people agree to share the risks and rewards of business ownership. Limited liability corporations and S Corporations are similar to partnerships but have improved tax benefits. Investing as a shareholder means you can benefit if the company does well, but you have no direct accountability for the company.
You typically buy shares of stock in a company through a stock exchange. The New York Stock Exchange and NASDAQ provide most of the common stock offerings available to individual investors. Regular trading hours each weekday are 9:30 a.m. to 4 p.m. Eastern time. Share prices usually go up or down daily as investors buy and sell.
More individual investors now manage their own stock investing through any of the prominent online stock trading platforms. Although you may not have the education or professional experience of stock brokers, you often have access to useful research tools, and commissions are regularly under $10 per trade. You can complete an online application to open an account. Aside from your personal data, you usually provide basic financial information in your application. An initial deposit is often required, although some online brokers ask for only $500 or $1,000.
Investing in stocks is more risky than keeping your money in basic savings and money market accounts. You can lose money by picking stocks that lose value. With careful research and company analysis, you can earn income from investing in shares in two ways. If the value of the shares increases after your purchase, you can eventually sell your shares and collect the gains. This happens when the company increases earnings or shows signs of growth. You can also earn income if the company issues dividends to shareholders. These are periodic payments made from company earnings to shareholders. Not all company's pay dividends.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.