The world population is showing a trend toward investing in shares. There are a lot of interesting factors in these shares as well. That is one reason for getting a lot of hype itself. There are different types of Shares as well. You might also be one of those people who love to invest in shares and the share market. If so, then you must know several factors about these shares. Knowing different types will also help you in the future to invest in shares. That is why it is really important to know the types of shares. Not only that, but you also need to ensure that you will invest in the perfect one.
What Are the Types of Shares
Before you get to know a bit of detail about different types of shares, the first thing you will need to know is the Types of Shares. Once you know about those shares, it will help you decide which might be the best one for indeed. The details and the factors will help you to get a better understanding of those shares.
While naming those, there are two Types of Shares. The first one is Ordinary Equity Shares and Preference Shares. Before you will go ahead and look for both shares, you need to know about those perfectly. Once you get a few details about these shares, it will help you to decide the perfect share for you that you can invest in. It will help you to get a lot of returns and all profits too. So, know about these shares with their definitions and identifications.
ALSO READ : Share market tips for first-time investors
Ordinary Equity Shares
These are the most common shares that you be getting in the market. The most interesting factor about this one is that you can get unlimited profits from this type of share. Also, if the company faces a loss, the shareholders will also experience a reduction in the share price. So, this type of share is just for those who are about to take many risks themselves. Also, there are different other factors of equity shares that you need to know.
Authorized Share Capital
This is the complete amount a company can rise from the stocks by issuing them. This will always be mentioned in the Memorandum of the Association.
Issued Share Capital
While a company already has issued some stocks, they will also get some amount from those stocks. This amount is known as Issued Share Capital.
Subscribed Capital & Paid-Up Capital
The first one is the number of shares that investors have subscribed to. It is possible that all the shares haven’t got sold, so those will be subscribed to capital.
If a company is going to calculate all the amount they have got from all the stocks that the investors have already bought, then you will get Paid-Up Capital.
Voting and Non-Voting Shares
The name of the share suggests the type of the share. If someone is a holder of voting shares, that person will be able to give votes for the company. On the other hand, the non-voting shares will allow that person with some particular votes or none at all. This is one of the most common factors in different Types of Shares.
This is for a company’s internal and existing shareholders, and the company will give them a certain number of shares at a certain price within a certain period. This process will happen before they issue it in the external market.
Sweat Equity Shares
This type of share is completely for the employees of a company, and the company gives it to them in return for some excellence. This is for a good job company makes those employees a shareholder. This Types of Shares are somehow special for the employees.
If a company is performing well and making a lot of profit, then only the company gives some extra shares to some shareholders as a gift. These bonus shares are just for not giving any dividends at all. So, to get some Bonus shares, you need to be a shareholder of that company itself.
This is a different kind of share than ordinary equity shares. So, there are some particular features for these shares. First, the price of this share can’t be unlimited, and the shareholders will not be getting the complete profit. Instead, they will be getting dividends from this Type of Share, which will be a fixed amount they will be getting contentiously. Also, the holder of this share will not have any voting powers, but they will get their money back earlier than the other during the liquifying of the shares.
Shareholders can easily convert these shares into equity shares. After certain stipulations from the company’s Article of Association, one can do this.
If someone is holding this kind of shares, they need to know that the company can easily claim those after a certain time. They can even buy those back from the shareholders.
Once someone has Participating shares, they can get the surplus profits over the dividends. So, these Types of Shares are somehow better as well.
If this is the type of share, then the shareholder will be able to get some outstanding dividends too. If any company does not announce the same for any particular company, that will be carried forward to the next year.
You have already got to know about different Types of Shares with different factors of those. So, you need to know the details and all the other factors. Once done, it will be easier to choose the most perfect and effective type of share for you. Once done, you need to go ahead and invest in that kind of share to increase your capital.
- What are the basic Types of Shares?
There are two basic types of shares: Ordinary Equity Shares and Preference Shares. Based on their rules, you can choose the one from those.
- In which share the profit will be divided among all the shareholders?
Ordinary Equity Shares will divide the profit of the company among all the shareholders. So, the return might be unlimited and huge as well.
- Which share will give the shareholders dividends?
If you want to get dividends, you must go for Preference Shares. You can receive that amount, but you won’t get an unlimited profit percentage from the company.