People purchase shares hoping that share prices will rise and that they will earn income through dividends. The increase in the price of shares or the increase of the stock value is called capital growth. Once capital growth has been gained, selling the shares will let you obtain a profit. However, any capital gain remains on paper until you sell the shares.

The stock market does not always work at an advantage for a shareholder. There are things that can go wrong with a specific company or the overall industry to which the company belongs. Chances are that the price of the shares would decrease and this is would result in capital loss. Investors, especially retirees, are interested in building their wealth through shares.

Listed companies will generally pay dividends to their shareholders, though many companies have policies to put the majority of their profits back into the business to help stimulate growth. Companies who give dividends set payout limits. Typically dividend payouts to investors make up to 60 percent of the company profit.

Dividends are often paid twice annually. The interim dividend is paid midyear whilst the final dividend is paid to shareholders at the end of the year. When combined, the two dividend payouts comprise the total or annual dividend.

Companies also give special dividends for special reasons including, gaining more profit than projected. A company may also have share buybacks, whereby it gives extra funds to its investors by reclaiming some of the shares at a set price. The capital gain, capital loss and dividends that the investors receive are included in their annual tax return. Thus, they must claim franking credits.

To ensure a profitable share investment, you must follow trends and try not relying just on a friend’s advice, if you have not seen changes in the market it may not be safe to invest. Never buy and sell at the same time, rather use cost averaging, timing transactions is very important. You must cut your losses and let your profit work for you, investing in the long-term works better.

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