If you’re ready to start investing, you should know a few key things before diving in.
Ask the right questions to avoid making money mistakes. The more questions you ask before investing, the more peace of mind you’ll have after putting in your money.
Most shares and investments fall into one of the three categories below, or a variation thereof.
1. Equity Shareholder
- Owns the company
- Has voting rights depending on the number of shares owned
- Involved in company decision-making
- Gets paid last in liquidation (after debenture holders and preference shareholders)
- Receives dividends after preference shareholders
- Entitled to stock buybacks
- Entitled to bonuses
2. Preference Shareholder
- No voting rights
- Not involved in company decision-making
- Receives dividends before equity shareholders
- Gets paid before equity shareholders but after debenture holders in liquidation
3. Debenture holders
- Creditors of the company
- Have no voting rights
- Receive interest payments instead of dividends
- Interest payments remain fixed and do not fluctuate with profits
- Interest is paid at fixed rates agreed upon between the company and the debenture holder
- Paid first in liquidation
Issues you should consider before investing your money:
- Voting Rights: Determine if you will have a say in the company’s decisions.
- Involvement in Decision-Making: Understand your role in the company’s decision-making processes.
- Payment Method: Clarify how you will be compensated—through dividends or interest.
- Liquidation Outcomes: Know what happens to your investment in case the company faces liquidation.
Invest your hard-earned money sensibly, safely, and wisely. Always maintain a high level of caution, and remember, there are no bad questions when it comes to protecting your investments.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact us at: info@silvesterlegal.com.
