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The extract taken from “Investing in stocks & shares” explains briefly some basic concepts:

A share in a company gives the investor a share in its dividend (declared once or twice a year), a stake in the company's assets and a vote (proportional to the size of the investor's holding) in the company's annual general meeting (AGM).

Most shares have a nominal value, which originally represented the asset value of the company. They were once sold at a market value which represented the worth of the assets and their ability to make money. The total of the nominal sum of all the issued shares is the issued share capital of the company.

There are some non-voting shares for certain companies, these enjoy most of the benefits of other shares, but the holder has no vote in the company's strategy. The original idea was to enable control of the company to be retained by the founding family.

The dividend of the company is the proportion of its profits paid to shareholders. A company will pay only part of its profits as a dividend, and the remainder is retained to increase internal growth of the company. It may also serve as a store of 'fat' (to maintain dividends in lean years), when profits are falling.

The P/E (price to earnings) ratio measures how many years of earnings per share (at the current share price) would be needed to pay for the share. Not all of the earnings are paid as dividend, so further years will be needed to repay the share price out of dividends.

Finally, the yield is the net percentage of the current share price. They are usually lower than the interest which could be more safely obtained by investment in local bonds. This is despite the fact that acceptance of risk, entitles the risk taker to a higher return than from a 'safe' investment.

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