If you are ready to start investing, there’s quite a bit you should know before you dive in.
One of the best ways to avoid making money mistakes is to ask the right questions. The more you ask before investing, the more at peace you will be after you put in money.
Most shares and investments will be in one of the three categories below, or some variation thereof.
1. Equity Shareholder
– Owns the company
– Has voting rights depending on the number of shares owned
– Involved in company decision-making
– In liquidation, get paid last (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
– In liquidation, gets paid before equity shareholders but after debenture holders
3. Debenture holders
– Creditors of the company
– No voting rights
– Receive interest payments instead of dividends
– Interest payments do not fluctuate depending on profits
– Interest paid in fixed rates agreed between the company and the debenture holder
– In liquidation, debenture holders are paid first.
Issues you should consider before investing your money:
1. Voting rights.
2. Involvement in company decision-making.
3. How will you be paid – dividends, interest.
4. What happens in liquidation.
Money is hard-earned, and should always be invested sensibly, safely and wisely. Keep caution at an all-time high, and remember, no question is a bad question.
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.
