Share

Part of the ownership of a company. A person who buys a portion of a company's capital
becomes a shareholder in that company's assets and as such receives a share of the company's
profits in the form of an annual dividend. Lucky or astute investors may also reap a capital
gain as the market value of the shares increases. Shares come in different forms:

ordinary shares No special rights (except voting rights) are attached to these, and the bulk of
a company's capital is issued this way.

preference shares These have priority over ordinary shares in entitlements to dividend
payments and in claims to the assets of a company if it is wound up.

Types of Shares
They are securities that represent a proportional part of the share capital of the company that has
issued them. The shares are of variable interest securities because its profits fluctuate.

According to how the shareholders are assigned the shares can be:

 Bearer shares: the owner is he who possesses them. They are easy to
negotiate because there are no registry procedures to do at the issuing
institutions.
 Registered shares: They are assigned to a determined name of a person and
the issuing institution maintains a registry of the shareholders.

The shares can also be:

 Ordinary: they don’t have any preferential rights and enjoy of the classical
rights.
 Preference: They give politics rights (as could be to have a place on the
company’s council, privilege in the distribution of dividends, etc.)

preference shares
Definition

Capital stock which provides a specific dividend that is paid before any
dividends are paid to common stock holders, and which takes precedence
over common stock in the event of a liquidation. Like common stock,
preference shares represent partial ownership in a company, although
preferred stock shareholders do not enjoy any of the voting rights of
common stockholders.

OWNERSHIP ADVANTAGES

The advantages of owning preference shares are many. Some of these are:
Tax-free status: Preference share coupon payments are treated as dividends and so they are
tax free to the unit holder.

This means that if a preference share is paying, for example, 12 per cent per annum, an
investor would have to find a taxable instrument paying in excess of 16 per cent (or 18 per
cent for a company) before they would have similar 'in pocket' returns.

The comparative rate is, therefore, much higher than many other available instruments.

Consistent dividend payments: The investor can know at the outset what the annual returns
will be on their investment - and, in some cases, the returns per month - as compared to the
unknown return of holding ordinary stock units which may vary from year to year, depending
on the movement of the stock's trading price.

Frequency of payments: Recently, preference shares have been coming out with interest
payments as regularly as once per month.

This allows the investor to efficiently plan his or her cash flow needs and, if the cash will not
be needed, to reinvest in an interest-bearing account and compound the returns.

Returns often exceed U.S. instruments: The Jamaican dollar's average annual depreciation
has been roughly 4.0 per cent against the US dollar; but has topped 6.0 per cent in the current
calendar year to date.

For the returns to the investor in USD-denominated instruments to exceed that of the
preference stockholder - given the rate of return that several of the newer issues have been
coming out at - the Jamaican dollar would have to depreciate by 9.0 per cent per year for all
the years until the preference stock matures.

DISADVANTAGE

Because preference shares are fixed-rate securities with, in many cases, a pre-set maturity
price, it will not move like ordinary stocks.

If, for example, a financial company were to discover a way to massively increase its profits,
while the ordinary share price would likely go through the roof, the price of the preference
shares would not see that gain since its returns are fixed.

It, therefore, might not be the asset type for investors looking for explosive gains.

Types of Preference shares:

Cumulative preference shares will accumulate any dividend that is not paid when due.

Any unpaid dividend is added to the amount payable the following year and no dividends can
be paid on ordinary shares until the entire backlog of unpaid dividends on cumulative prefs is
cleared.
Unless a company is in a very poor financial condition, holders of cumulative prefs can be
fairly sure of getting the due pseudo-interest, although the timing is somewhat more uncertain
than would be the case with bonds.

"Non-cumulative" preferred shares do not accumulate dividends that are in arrears. The
only provision on these shares is usually that common dividends cannot be paid if the
preferred dividends are not being paid.

Redeemable preference shares

Redeemable preference shares

Shares which, on a stated maturity date, the issuing company will buy back for face value
plus dividend. Being preference shares, they rank ahead of ordinary shares, but behind
debentures, in any claim on the assets of the company.

Types of Preference Shares

1.Cumulative or Non-cumulative : A non-cumulative or simple preference shares gives right to fixed
percentage dividend of profit of each year. In case no dividend thereon is declared in any year because of
absence of profit, the holders of preference shares get nothing nor can they claim unpaid dividend in the
subsequent year or years in respect of that year. Cumulative preference shares however give the right to the
preference shareholders to demand the unpaid dividend in any year during the subsequent year or years when
the profits are available for distribution . In this case dividends which are not paid in any year are accumulated
and are paid out when the profits are available.

2.Redeemable and Non- Redeemable : Redeemable Preference shares are preference shares which have to be
repaid by the company after the term of which for which the preference shares have been issued. Irredeemable
Preference shares means preference shares need not repaid by the company except on winding up of the
company. However, under the Indian Companies Act, a company cannot issue irredeemable preference shares.
In fact, a company limited by shares cannot issue preference shares which are redeemable after more than 10
years from the date of issue. In other words the maximum tenure of preference shares is 10 years. If a company
is unable to redeem any preference shares within the specified period, it may, with consent of the Company Law
Board, issue further redeemable preference shares equal to redeem the old preference shares including dividend
thereon. A company can issue the preference shares which from the very beginning are redeemable on a fixed
date or after certain period of time not exceeding 10 years provided it comprises of following conditions :-

1. It must be authorised by the articles of association to make such an issue.

2. The shares will be only redeemable if they are fully paid up.

3. The shares may be redeemed out of profits of the company which otherwise would be available for
dividends or out of proceeds of new issue of shares made for the purpose of redeem shares.

4. If there is premium payable on redemption it must have provided out of profits or out of shares
premium account before the shares are redeemed.

5. When shares are redeemed out of profits a sum equal to nominal amount of shares redeemed is to be
transferred out of profits to the capital redemption reserve account. This amount should then be utilised
 for the purpose of redemption of redeemable preference shares. This reserve can be used to issue of
fully paid bonus shares to the members of the company.

3.Participating Preference Share or non-participating preference shares : Participating Preference shares

are entitled to a preferential dividend at a fixed rate with the right to participate further in the profits either along
with or after payment of certain rate of dividend on equity shares. A non-participating share is one which does
not such right to participate in the profits of the company after the dividend and capital have been paid to the
preference shareholders.

Convertible and Non Convertible preference shares:

What Does Convertible Preferred Stock Mean?

Preferred stock that includes an option for the holder to convert the preferred shares into a
fixed number of common shares, usually anytime after a predetermined date. Also known as
"convertible preferred shares". Non convertible preference shares are those preference shares
which cannot be converted into common or the equity shares at the option of the share holder.

Blue Chip Shares

Named after the highest-value gambling tokens in a casino, blue chips are the largest
companies whose shares are traded on major stock exchanges.

Blue chips tend to be high-profile, house-hold-name companies with long-term track records.
Almost all have histories of steady profits performance, which is nor-mally reflected in a
steadily increasing share price. For this reason they usually account for at least part of any
investor's portfolio.

Some examples will make clear the types of companies which are regarded as blue chips in
the UK: British Airways, Marks & Spencer, Barclays Bank and Guinness. All impressive,
well-known enterprises - everyone knows what they do. And of course, these types of well-
known shares are not restricted to the United Kingdom. Think of Coca Cola in the United
States or Adidas in Germany.

Some examples will make clear the types of companies which are regarded as blue chips in
the UK: British Airways, Marks & Spencer, Barclays Bank and Guinness. All impressive,
well-known enterprises - everyone knows what they do. And of course, these types of well-
known shares are not restricted to the United Kingdom. Think of Coca Cola in the United
States or Adidas in Germany.

They also tend to have lots of shares in issue held by the longest-term profession-al investors,
such as pension funds and unit trusts, which are unlikely to dump their shareholdings
suddenly.

Blue chips are seen to have long-term value, which allows them to ride out the short-term
vagaries of the stock market. That is, they don't readily fall in and out of fashion, since they
have a steady core business, a good brand name, a history of sound management and the clout
to dom-inate an industrial, retail or service sector. They do not rely for their turnover and
profits on one single product or service which may cease to be needed.
The fact that the share price of blue chips does not go through the floor or the roof overnight
is of particular importance to those investors who do not have time to watch every move of
the markets. This stability is partly due to the fact that most blue chip shares are held by
institutional investors whose professionals will often anticipate a major change before it
happens - meaning that the share price at any one time takes account of their expecta-tions,
and movements are consequently gradual Sudden developments in a major blue chip are not
unknown, however, and they will often colour a whole sector of a mar-ket. For example, had
news from one large computer manufacturer is likely to depress all electrical shares if the
market is feeling jumpy. During 1997, shares in banks saw massive price rises thanks to
speculation about mergers and takeovers in the banking sector.

Blue chips make up the constituents of the FTSE 100 Index, or Footsie, based on the 100 UK
companies with the largest market capitalisation. The Footsie is an average of the share prices
of these 100 companies, proportionate to their size. So the larger the company, the more
effect its share price has on movements in the index. If you don't want to invest in the shares
themselves, you can invest indirectly in the constituent companies of the FTSE 100 through a
unit trust which tracks the index. For more details of tracker funds see pages 50-51.

Overleaf Performance of current five 100 shares over five years

Blue Chip stocks refer to shares of companies that are financially sound and have a high
maturity, plus usually a reliable dividend payment regardless of the state of the economy.

IBM is often mentioned as prime example.

Generally, investing in Blue Chip stocks is considered less risky.

A blue chip stock is the stock of a well-established company having stable earnings and no
extensive liabilities. The term derives from casinos, where blue chips stand for counters of
the highest value. Most blue chip stocks pay regular dividends, even when business is faring
worse than usual.

The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company
folklore recounts that the term apparently got its start when Gingold was standing by the
stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at
$200 or $250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he
intended to return to the office to “write about these blue chip stocks.” Thus the phrase was
born. It has been in use ever since, originally in reference to high-priced stocks, more
commonly used today to refer to high-quality stocks.In contemporary media, Blue Chips and
their daily performances are frequently mentioned alongside other economic averages like the
Dow Jones Industrial Average!!

Blue chips share several important characteristics including:

 An established record of stable earning power over several decades

 An equally long record of uninterrupted dividend payments to common stock holders
  A history of regular increases in the dividends payable to each share
 Strong balance sheets with a moderate debt burden
 High credit ratings in the bond and commercial paper markets
 Large size relative to American businesses as a whole in terms of revenue and market
capitalization
 Diversified product lines (e.g., General Electric) and / or geographic location (e.g.,
Coca-Cola).
 A competitive advantage in the market place due to cost efficiencies, franchise value
or distribution control

Income shares

Definition

The term can refer to shares bought in anticipation of an above average income being
produced. Also referred to as high yield shares. This normally means that the investor has
chosen shares in companies that have a history of paying consistently high dividends. There
is no guarantee that the companies will continue to provide the same level of dividends in the
future. The term also refers to those shares in a split capital investment trust which receive
most or all of the trusts income. The other class of shares (capital shares) get the benefit of
the trusts capital growth.

Cyclical and Non cyclical share:

What Does Cyclical and Non-Cyclical Mean?

These terms, cyclical and non-cyclical, refer to how highly correlated a company's share price is to
economic fluctuations. Non-cyclical stocks repeatedly outperform the market when economic
growth slows, while cyclical companies are highly correlated to the economy. The non-cyclical
securities, also called defensive stocks, experience profit regardless of economic gyrations because
they produce or distribute goods and services we always need: food, power, water and gas. The
sales of companies with cyclical stocks, on the other hand, depend on whether or not the economy
is strong; sales will thrive when people have extra income to spend on luxuries, and they'll decline
when the economy slumps.

Charting a Cyclical vs. Non-Cyclical Company

Below is a chart showing the performance of a highly cyclical company, the Ford Motor Co.
(blue line), and a classic non-cyclical company, Florida Public Utilities Co. (red line). This
chart clearly demonstrates how each company's share price reacts to downturns in the
economy.
Notice that the downturn in the economy from 2000 to 2002 drastically reduced Ford's share
price, whereas the growth of Florida Public Utilities' share price hardly batted an eye at the
slowdown.

Defensive shares

A term that describes shares that do well in bad economical conditions. These shares
typically belong to companies that provide necessary goods or services, such as food, water,
electricity and gas. As the overall market value falls, these shares can be expected to remain
stable or even increase in value.

Defensive shares tend to be relatively unexciting investments as performance is usually

steady rather than spectacular.

growth shares:

Shares issued by a firm with a consistent record of above average earnings. Such shares are
expected to trade at an increasing value over an extended period. In many ways, a growth share is
the opposite of an income share. They pay low dividends and reinvest their profits into growing their
business. Investors give up income today (in the form of dividends) in the hope of better returns in
the future, in the form of growing sales and profits, and therefore a rising share price. Successful
growth stocks tend to have a track record of growth in sales and earnings and also pay at least a
modest dividend. Example of growth shares is: Microsoft.

Speculative shares

Speculative shares are usually small companies, often newly formed. These companies are almost
always focused on delivering growth – fast. As investments, speculative shares are high risk due to a
lack of financial strength or track record in earnings and dividends.
Value shares

A value share is one that looks ‘cheap’. Value shares tend to have low PE ratios and high dividend
yields. As such, value shares are often either defensive shares (which typically have low PE ratios) or
income shares (which have high dividend yields). However, growth shares can also be value shares if
they have a low PE ratio in relation to its future growth prospects.

Quality shares

Probably the most important class of shares are quality shares. Quality shares can be found in any of
the above categories. Look for great management, a rock-solid business and finances, and a track
record of growth in profits and dividends.

What Does Large Cap - Big Cap Mean?

A term used by the investment community to refer to companies with a market capitalization
value of more than $10 billion. Large cap is an abbreviation of the term "large market
capitalization". Market capitalization is calculated by multiplying the number of a company's
shares outstanding by its stock price per share.

Large cap is an investing abbreviation for Large Capitalization. It is a reference to the market
value or "capitalization" of a stock listed on public exchange such as the Dow Jones stock
exchange. A stock or company is said to be large cap if it's market value is between 10 billion
and 200 billion dollars. The limits though are somewhat arbitrary and will vary depending on
who you ask. General Electric (GE) is an excellent example of a large cap stock or company.

Large cap stocks are generally considered safe stocks. The sheer size of these companies
tends to make the stock price fairly stable. It is unusual for them to experience significant
growth or to see large declines in the value of their stock price. For this reason, many
investors tend to park their money in large caps during times of uncertainty or unrest in the
stock markets.

However, not all large cap companies can be considered safe. Even among the stocks
considered safe there are better choices than others. An intelligent and diligent investor will
still review the specific company's financial statements and perhaps the industry outlook
before investing in a particular stock.

What Does Mid Cap Mean?

A company with a market capitalization between $2 and $10 billion, which is calculated by

multiplying the number of a company''''s shares outstanding by its stock price. Mid cap is an
abbreviation for the term "middle capitalization".

Mid Cap Funds

Mid cap funds are those mutual funds, which invest in small / medium sized companies. As
there is no standard definition classifying companies as small or medium, each mutual fund
has its own classification for small and medium sized companies. Generally, companies with
a market capitalization of up to Rs 500 crore are classified as small. Those companies that
have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as
medium sized.

Big investors like mutual funds and Foreign Institutional Investors are increasingly investing
in mid caps nowadays because the price of large caps has increased substantially. Small / mid
sized companies tend to be under researched thus they present an opportunity to invest in a
company that is yet to be identified by the market.
Such companies offer higher growth potential going
forward and therefore an opportunity to benefit from
higher than average valuations.

But mid cap funds are very volatile and tend to fall like a pack of cards in bad times. So,
caution should be exercised while investing in mid cap mutual funds.

What Are Small Cap Stocks?

Companies that have small capitalization amounts are considered small companies or smaller
quoted companies (SQCs) and are sometimes called small caps. The stocks from these
companies are known as small cap stocks.

Small cap companies are often started by people with great ideas and lots of enthusiasm and
often initial fast growth is very possible, allowing the investor to make lots of money. In
many cases, small companies are idea-based. An inventor may create great new software, for
example. In the initial stages of the company, the business enthusiasm and the newness of the
product can produce rapid growth that is not always feasible in a larger company.

In the current market, small companies are simply swallowed up by larger companies. If you
invest in a small company and the company is forced out of business or bought by another
company, you will not recoup your investment). Plus, smaller companies often have shorter
histories than larger companies, meaning that you may not have all the information you need
to make the right investment choice when you invest in small caps.

Intro:

a share or stock is a document issued by a company, which entitles its holder to be one of the
owners of the company. A share is issued by a company or can be purchased from the stock
market.

By owning a share you can earn a portion of the share capital and selling shares you get
capital gain. So, your return is the dividend plus the capital gain. However, you also run a
risk of making a capital loss if you have sold the share at a price below your buying price.

A company's stock price reflects what investors think about the stock, not necessarily what
the company is "worth." For example, companies that are growing quickly often trade at a
higher price than the company might currently be "worth." Stock prices are also affected by
all forms of company and market news. Publicly traded companies are required to report
quarterly on their financial status and earnings. Market forces and general investor opinions
can also affect share price

Equity Shares:

Securities representing equity ownership in a corporation, providing voting rights, and

entitling the holder to a share of the company's success through dividends and/or capital
appreciation. In the event of liquidation, common shareholders have rights to a company's
assets only after bondholders, other debt holders, and preferred shareholders have been
satisfied. Typically, common shareholders receive one vote per share to elect the company's
board of directors (although the number of votes is not always directly proportional to the
number of shares owned).

Equity share is also referred to as ordinary shares and in

Indian context it is defined by section 85 (2) of the

companies act 1956. They are the real risk-takers and care-

takers of the company and they enjoy the right of voting.