Investing in shares
Shares are one of the four main investment types, along with cash, bonds, and property. Investment in share carries risk, along with higher returns. Here you can find out what they are, how to invest in shares and what risks are involved.
What are shares?
Shares are bought and sold on the Nepal Stock Exchange Limited, For Nepal, Nepal Stock Exchange is the only share market to trade in the primary and secondary market.
How does investing in shares work
Investing in shares means buying and keeping them for a while in order to make money or trade in the secondary market.
You can make money from shares of a company in the following ways:
- Holding the companies share which grows and becomes valuable, the share is worth more and trading value in secondary market increase as well– so your investment is worth more too, and you can make more money by selling them at a higher price than you have paid for.
- Some shares pay a dividend each year. (Dividend is paid either in form of cash dividend or bonus share)
The price of a share will fluctuate over time if people change their expectation and forecast about the performance and economic condition of the company. If a share price reduces then the value of your investment reduces as well. At the peak of NEPSE Index 1888 on 27th July 2016, now share are trading below half a price of the same stock at that peak time, (for example, NABIL was trading at Rs 2,397 now it is trading at Rs. 845, Unilever was trading at 35,000+ and Now it is trading at Rs. 20,000) . Right share and Bonus share by the companies also contribute to decreasing the value of the stock most of the bank has issued heavy bonus share after the announcement by Nepal Rastra Bank to increase the minimum share capital to 8 Billion (Arba).
However, shares have historically provided better returns over the long run than the other main asset classes: property, cash or bonds. Holding shares in just one company is very high risk so you must always diversify your investment to the different companies even to the different sectors.
If that company gets into difficulties then you could lose some or all of your money.
If you’re well diversified and invest long term (for more than five years) you can keep risk down, and have a chance of good returns.
Think carefully and analyze data carefully before you invest in a company. Is the investment right for your needs? What are the risks, and what might they mean for you?
How to invest in shares?
Buying and selling shares
If you want to buy and sell shares that you own yourself, you can use:
- an online broker
- a traditional stockbroker
- a financial adviser or investment manager – you can ask them to buy or sell shares for you, but they’ll still go through a stockbroker.
Here you can get more detailed information about how to start investing