Becoming a shareholder means owning a part of a company and having a say in its decisions. Shareholders can benefit from dividends, capital gains, and voting rights, but they also face risks and responsibilities. If you want to become a shareholder, you need to understand the basics of financial management and follow these steps.
The first step is to research and select a company that you want to invest in. You can use various sources of information, such as financial statements, annual reports, news articles, analyst ratings, and industry trends, to evaluate the company's performance, growth potential, competitive advantage, and risks. You should also consider your own goals, budget, risk tolerance, and time horizon, and look for a company that matches your criteria.
Becoming a shareholder takes patience in selecting a company that resonates with your own investment goals, risk tolerance and values. It is prudent to evaluate the company's performance, key risks, potential for growth and competitive edge before selecting to invest. Staying informed about the company's changes in all of these areas will enable your decision-making as a sophisticated shareholder.
There are two main ways to become a shareholder: Purchasing shares of publicly traded companies through a brokerage account, or investing directly in private companies typically by contacting them and agreeing on terms. While public stocks offer immediate access and liquidity, private investments can involve higher risk but also potentially higher returns if the company succeeds. Choose the path that aligns with your financial goals and risk tolerance!
Do your due diligence and find out about the history of the company you are interested to invest in. Look into the technicals and stock details for the last 10 years. If they look good in numbers with a rock solid management, you can choose to buy the share of the company through a DMAT account. Always go with big brokers as they have applications for your phone to track your investment and they are trust worthy.
The second step is to open a brokerage account with a licensed and reputable broker. A brokerage account is a platform that allows you to buy and sell shares of different companies on the stock market. You can choose from various types of brokerage accounts, such as online, full-service, or discount brokers, depending on your preferences, needs, and fees. You will need to provide some personal and financial information, such as your name, address, social security number, income, and investment objectives, to open an account.
The third step is to place an order to buy shares of the company you have chosen. You can use different types of orders, such as market, limit, stop, or trailing stop orders, to specify the price, quantity, and timing of your purchase. You can also use different order durations, such as day, good till canceled, or fill or kill orders, to indicate how long your order will remain active. You will need to pay the broker a commission fee for executing your order.
The fourth step is to receive confirmation of your order from the broker. The confirmation will include details such as the date, time, price, quantity, and total amount of your purchase, as well as the commission fee and any taxes or charges. You should review the confirmation carefully and keep a record of it for future reference. You should also check your brokerage account statement to see your updated balance and holdings.
The fifth step is to monitor your investment and track its performance over time. You can use various tools, such as charts, graphs, indicators, and alerts, to analyze the price movements, trends, and patterns of your shares. You should also keep an eye on the company's news, earnings, dividends, and announcements, as well as the overall market conditions, to identify any opportunities or threats that may affect your investment. You should also review your portfolio regularly and adjust your strategy accordingly.
The sixth step is to decide whether to sell or hold your shares. You can sell your shares at any time if you want to lock in your profits, cut your losses, or diversify your portfolio. You can use the same types of orders and durations as when you bought your shares to execute your sale. You will need to pay the broker another commission fee for selling your shares. Alternatively, you can hold your shares for the long term if you believe in the company's future prospects and want to enjoy its dividends and voting rights. You should always weigh the pros and cons of selling or holding your shares and make an informed decision based on your goals and circumstances.
In case that you hold a share in the private company, it’s essential to have in place shareholder agreement between other shareholders. The provisions of shareholders agreement should be adopted by Articles of Association of the company. In common law, if there is no consistency between the provisions of Articles of the company and shareholders’ agreement then the Articles of Association prevails!
If you wish to be a direct shareholder of record at the company, rather than holding shares through a broker, contact the company’s Transfer Agent. This information can be found through the Investor Relations information on the company website.