Share Dealing and Stock Trading
Share dealing is perhaps the most orthodox form of investing, allowing businesses to capitalise while providing private investors and funds with the chance to get involved in some of the world's biggest companies. The global equities markets exchange billions on a daily basis between a diverse collection of traders and investment funds, and the countless tales of stock market hotshots hitting the big time apparently overnight continue to attract new blood to the markets in droves. But what exactly is share dealing, and how do share transactions generate value for the companies and traders involved?
Share dealing is the process of trading equity in publicly traded companies, allowing speculation on the future value of a company while enabling traders to shape how a given entity is managed. To put it another way, it is the dealing in 'shares' of company profits and decision making, which has a value variable to the immediate and anticipated future yield of the company concerned.
Shares are bought and sold largely as investments, in the hope that the ongoing dividend yield (i.e. the money paid by the company to its shareholders) will deliver a better return than other forms of investment. However, it is also possible to make money on sheer speculation, buying shares at a low price and selling when they reach a higher price. Indeed, it is often the case that share traders have no concern in exercising their rights as share holders in voting at company AGMs and choosing the board of directors, but are solely involved in buying to sell at a future date when the price of the shares rises.
Share transactions were originally formulated to give businesses the ability to raise capital, in order to fund large projects or, of increasing prevalence in more recent times, to provide the owners with the lucrative exit of which they've always dreamed.
A share, being at its most basic level a share in the profits of the company, is valuable to an investor, and effectively allows the business to raise money today against the security of future profits, simply by selling a proportion of its ownership. For the buyer, this share of ownership allows them to take an active role in the direction of a company, and with scale, affords a mechanism through which entire organisations can be bought and sold.
Today, the markets are largely automated, and publicly traded companies seldom know the details of individual shareholders, let alone scrutinising their credentials for ownership. Rather, shares are something of a commodity that are traded widely amongst faceless investors and funds the world over, who rely on the desire of businesses and other stakeholders to buy up successful companies in order to realise their profit.
In a nutshell, share dealing is the process of trading shares in large businesses, which have a value related directly to the market's perception of the underlying value of the business. While traders are seldom concerned about directing and guiding the company in which they invest, shares provide a viable mechanism through which investors can trade off the back of corporate success, while having their own say in future corporate governance.