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Understanding Shares

The price of a company's shares reflects supply and demand for those shares. If there are more people willing to buy at higher and higher prices, the price will go up. If there are more sellers the price will go down.

Understanding Shares

It is very important to understand that the price of a share will always illustrate the concept that 'it is always better to travel than to arrive'; i.e. the price not only reflects what has been reported and what is known, but it also takes into consideration what is expected to happen in future.

It should also be noted that a share priced at £5 is not necessarily better value than one priced at £15. The price of each individual share reflects the overall value of the company when it is multiplied by the number of shares that are in issue.

In order to assess the merits of a company as a potential investment you should consider the following:

  • Dividend Yield
  • Dividend Cover
  • Gearing level
  • Growth potential - of the company and its sector
  • Liquidity - current and potential future liquidity
  • Market capitalisation
  • Profitability - both historic and forecast
  • Valuation compared to similar companies
  • Quality of management
  • Strength of balance sheet - in particular, levels of borrowings and availability of asset backing
  • Collectives

For a fuller understanding of these, and many other, terms have a look through our glossary.

Types of Investment »

  • Investments and income arising from them can fall in value and you may lose some or all of the amount you have invested.
  • The services and investments referred to in this website may not be suitable for all private investors; before taking any action based upon this website you should consult ourselves or an independent adviser.
  • If you require more guidance with investment decisions or wish to place the management of your portfolio in expert hands, please contact your local branch or call 0113 200 6560 and we will discuss with you the suitability of our services and products.

Info Point

Learn more about investing:

Stock Market for Beginners »

Which Service Should I Choose? »

Investment Risk »

Understanding Shares

Types of Investment »

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