Shares (also known as equities) are like a tiny fractions of a company. When you buy a share, you gain part ownership of that company, which usually means you have the right to vote on some company decisions.
Any return you get from shares comes from share price growth or from dividends – payments out of the company’s profits.
Shares are bought and sold on the stock exchange. Shares from big companies are traded on the London Stock Exchange (LSE) – you’ll hear these called ‘listed shares’ – and smaller companies are traded on the Alternative Investments Market (AIM).
The price of a share will go up and down. Returns from either profits or dividends aren’t guaranteed and you could get back less than you initially invested. You might get no dividends and the share price can fall.
Holding shares in just one company can be risky. By holding shares from companies in different industries and regions, you can create a diversified portfolio and aim to spread your risk, which might help you achieve smoother return.