What are Ordinary Shares?

The share market is a great place to invest, but it is important that investors are prepared with all relevant information. Ordinary shares are one of the most popular types of shares on the market. Investors should be familiar with them. This is what you need to know to understand ordinary shares and their types, as well as the benefits they provide to investors.

What are ordinary shares?

Let's first look at the meaning of ordinary shares, its definition and how it fits in the overall stock context.

Ordinary shares, which are the shares that a company gives out, represent a fraction of ownership in that company. These shares are also known by the common stock name and reflect the shareholder's ownership in the company assets. It is the ordinary shares that are most commonly referred to in stock market discussions and stock ownership.

Ordinary shares are commonly traded on the market to help companies raise capital. You are entitled to certain benefits as a holder of ordinary shares within a company. These include the right to vote at major shareholder meetings. Dividend payments can also be available to ordinary share holders. This is dependent on the company's performance and other factors.

Ordinary shares are different from'preferred share' which guarantee shareholders dividends. We will talk later about the many benefits of ordinary shares, which make them attractive investment options.

Types of ordinary shares

You will likely come across, and potentially trade in, various types of ordinary shares as an investor in the stock exchange. These are the most popular types of shares on the market. However, ordinary shares can be further classified based on their particular characteristics. Let's take a closer look at some of them.

1. Non-voting shares - These ordinary shares are used to determine how much a shareholder can vote on major company decisions. Non-voting shares, on the other hand, are ownership with no or differential voting rights. Voting shares provide such voting rights.
2. Sweat Equity shares - These equity shares are often offered by companies to employees or senior executives as a way of incentiving them.
3. Right Shares - Existing shareholders have the option to purchase additional shares of the company before they are traded on the market. These are called right shares.

What are the advantages of ordinary shares?
We have now covered the meaning of ordinary shares as well as their types. Let's take a closer look at the benefits these shares can bring to average investors. What are the advantages of ordinary shares, given their popularity in stock markets?

It is important to remember that ordinary shares are not the primary source of income for stock market investors. Ordinary shares do not guarantee dividends, which is a difference to preferred shares. Ordinary shares are held in value by price fluctuations that occur with changing market conditions. Ordinary shares can also be transferred, so if a shareholder spots an opportunity to sell them, they can do so and keep the profit.

Ordinary shares also offer some ownership, allowing shareholders to participate in important company decisions. This is in contrast to preferred shares. This means that ordinary shares can carry greater financial risks for shareholders, but they can also offer greater financial rewards if the company performs well.

Conclusion

The stock market is full of ordinary shares. With the right amount information, they can be a smart investment for the right investor. Ordinary shares offer ownership rights and the potential to reap rewards. However, the company's performance as well as its policies will determine the value of ordinary shares. It is important to do your research before you invest in ordinary shares or any other assets in the stock exchange.