Shares; are they really only for the rich/investors?
Small purchases will have a disproportionate expense for commissions. Even a $5 trade fee is 5% on a $100 purchase. So on one hand, it's common to advise individuals just starting out to use mutual funds, specifically index funds with low fees. On the flip side, holding stocks has no annual fee, and if you are buying for the long term, you may still be better off with an eye toward cost, and learn over time.  In theory, an individual stands a better chance to beat the experts for a number of reasons, no shareholders to answer to, and the ability to purchase without any disclosure, among them. In reality, most investor lag the average by such a wide margin, they'd be best off indexing and staying in for the long term. A guy I used to work with would buy some shares in certain companies on a regular basis.  The guy in question chose Coke, Pepsi, GE, Disney and some other old stable stocks.  He just kept buying a few shared ($50 or so at a time) year after year after year.  He worked his entire life, but by the time he was ready to retire, he had a pretty sizable investment; he was worth a rather tidy sum. The moral of the story is, it is very much worth it to invest a bit at a time.  Don't bother with the idea of buying low and selling high; not right now.  Just go ahead and buy stable stocks (or shares of index funds) and wait them out.  This strategy (mixed with other retirement tactics like a 401K from work, and IRA of your own, Social Security in the US) is a good way to build wealth. Don't spend money you don't have, be ready for a long term investment and I think it makes great sense, regardless of what country you live in. I think small sums invested regularly over long-term can do good for you, things to consider:  I would go with an index fund and contribute there there regularly. I think I have a better answer for this since I have been an investor in the stock markets since a decade and most of my money is either made through investing or trading the financial markets. Yes you can start investing with as low as 50 GBP or even less. If you are talking about stocks there is no restriction on the amount of shares you can purchase the price of which can be as low as a penny. I stared investing in stocks when I was 18. With the money saved from my pocket money which was not much. But I made investments on a regular period no matter how less I could but I would make regular investments on a long term. Remember one thing, never trade stock markets always invest in it on a long term. The stock markets will give you the best return on a long term as shown on the graph below and will also save you money on commission the broker charge on every transaction. The brokers to make money for themselves will ask you to trade stocks on short term but stock market were always made to invest on a long term as Warren Buffet rightly says. And if you want to trade try commodities or forex. Forex brokers will offer you accounts with as low as 25 USD with no commissions. The commission here are all inclusive in spreads.  Is this true? Can the average Joe become involved? Yes anyone who wants has an interest in the financial markets can get involved. Knowledge is the key not money. Is it worth investing £50 here and there? Or is that a laughable idea? 50 GBP is a lot. I started with a few Indian Rupees. If people laugh let them laugh. Only morons who don't understand the true concept of financial markets laugh. There are fees/rules involved, is it worth the effort if you just want to see? The problem with today's generation of people is that they fear a lot. Unless you crawl you dont walk. Unless you try something you dont learn. The only difference between a successful person and a not successful person is his ability to try, fail/fall, get back on feet, again try untill he succeeds. I know its not instant money, but I'd like to get a few shares here and there, to follow the news and see how companies do. I hear that BRIC (brasil, russia, india and china) is a good share to invest in Brazil India the good thing is share prices are relatively low even the commissions. Mostly ROI (return on investment) on a long term would almost be the same. Can anyone share their experiences? (maybe best for community wiki?) Always up for sharing. Please ask questions no matter how stupid they are. I love people who ask for when I started I asked and people were generous enough to answer and so would I be. "Shares are for investors. Most of the rich are investors. Unfortunately, the reverse is not true. But if you want to get rich, the first step is to become an investor. (The second is to become a SUCCESSFUL investor. 50 pounds might be too little. Try to start with at least 500 at a time. You can ADD amounts of 50 pounds. There are definitely fees involved. You will ""pay for lessons."" But it will be worth it, if you become even a moderately successful investor. As for rules, they'll teach you the rules. Everyone wants your business. People have gotten (modestly) rich, buying shares here and there. One man told me of investing $600 in a company called Limited, and ending up with $12,000 some years later. BRIC is not a ""share."" It is an acronym for four countries ""of the future."" High risk, high reward here." Put £50 away as often as possible, and once it's built up to £500, invest in a stockmarket ETF. Repeat until you retire. As a matter of fact, I invest small sums in stable stocks every month (in fact, much lesser than the $50 you are talking about). More than the return on investment, I gained a lot of knowledge keeping track of my stocks and this now helps me pick my stocks better. And the portfolio is doing great too. So, it is a good idea to start small and invest regularly.
As a corollary to this; the average investor will never know more than the market. Buffett can buy mispriced securities because he runs a multi-billion dollar company dedicated to finding these mispricings.   My advice for the common man:  1. Invest in both Stocks (for growth) &amp; Bonds (for wealth preservation) 2. Stocks should be almost exclusively Index Funds  That's it.  The stock market has a 'random walk with a positive drift' which means that in general, the market will increase in value. Index funds capture this value and will protect you against the inevitable BoA, AIG, Enron, etc.   It's fine to invest in index funds with a strategy as well, for instance emerging market ETFs could capture the growth of a particular region. Bear ETFs are attractive if you think the market is going to hit a downturn in the future. No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels.  Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note. Hi I have a question about net worth value of rich people on those forbes lists. For example most of those rich people have high net worth because they are shareholders. Do they take into account that if they want to sell all their assets then actually they would receive much less in cash (as the stock price would drastically drop) or is it just the nominal net worth (i.e. the value of all their at the current price) Those compensated by commission, not your moneyed elite. Those types are going to get out of taxes anyway.  Capital gains crush the middle and upper middle class like no other. BTW, now you sound even less like you know what you're talking about. Gotcha.  So they essentially are just your normal dude that puts money in the stock market, just bigger money.  For example, I may buy a few stocks in Apple in the hopes that I can exit at a higher price and have higher dividends.  Those big investors are doing the same thing for the 2 benefits I said earlier, but they have more money to invest.  Or do they get other benefits that us average stock holders dont get?  Thanks for the first reply. "Ditto to MD-Tech, but from a more ""philosophical"" point of view: When you buy stock, you own it, just like you own a cell phone or a toaster or a pair of socks that you bought. The difference is that a share of stock means that you own a piece of a corporation. You can't physically take possession of it and put it in your garage, because if all the stock-holders did that, then all the company's assets would be scattered around all the stock-holder's garages and the company couldn't function. Like if you bought a 1/11 share in a football team, you couldn't take one of the football players home and keep him in your closet, because then the team wouldn't be able to function. (I might want to take one of the cheerleaders home, but that's another subject ...) In pre-electronic times, you could get a piece of paper that said, ""XYZ Corporation - 1 share"". You could take physical possession of this piece of paper and put it in your filing cabinet. I'm not sure if you can even get such certificates any more; I haven't seen one in decades. These days it's just recorded electronically. That doesn't mean that you don't own it. It just means that someone else is keeping the records for you. It's like leaving your car in a parking lot. It's still your car. The people who run the parking lot doesn't own it. They are keeping it for you, but just because they have physical possession doesn't make it theirs." "See Berkshire Hathaway Inc. (BRK-A) (The Class A shares)  and it will all be clear to you. IMHO, the quote for the B shares is mistaken, it used earning of A shares, but price of B. strange. Excellent question, welcome to SE.  Berkshire Hathaway is a stock that currently trades for nearly US$140,000. This makes it difficult for individual investors to buy or sell these shares. The CEO Warren Buffet chose to reinvest any profits which means no dividends, and never to split the shares, which meant no little liquidity.  There was great pressure on him to find a way to make investing in Berkshire Hathaway more accessible. In June '96, the B shares were issued which represented 1/30 of a share of the Class A stock. As even these ""Baby Berks"" rose in price to pass US$4500 per share, the stock split 50 to 1, and now trade in the US$90's.  So, the current ratio is 1500 to 1. The class B shares have 1/10,000 the voting rights of the A. An A share may be swapped for 1500 B shares on request, but not vice-versa." Value investing is just an investment strategy, it's an alternative to technical investing. Buffet made money picking stocks.  It's not obvious how that adds value, but it does. Everything about the stock market is ultimately about IPOs. Without active trading, of stocks after issue, no one would buy at the IPO.  The purpose of an IPO is to finance the long-term growth of a business, which is the point in the process where the value to the people gets created.  There is a group of elites that needs to be dealt with, you're correct, but I worry that your definition of this group is overly broad. One reason a company might choose to pay a dividend is because of the desire of influential stockholders to receive the dividend.   In the case of Ford, for example, there are 70 million shares of Class B stock which receive the same dividend per share as do the common stock holders.  Even though there are 3.8 billion shares of common stock, the Class B owners (which are Ford family) hold 40% of the voting power and so their desires are given much weight.   The Class B owners prefer regular dividends because if enough were to sell their Class B shares, all Class B shares (as a block) would have their voting power drop from 40% to 30%, and with further sales all special voting would be lost and each Class B share would be equivalent to a common share in voting power. Hence the Class B owners, both for themselves and for all of the family members holding Class B, avoid selling shares and prefer receiving dividends. "The usual pattern is that shareholders don't run companies in a practical sense, so ""if someone was just simply rich to buy > 50%, but does not know how to handle the company"" doesn't change anything. In large companies, the involvement of shareholders is limited to a few votes on key issues such as allocating profit (how much to keep in company vs pay in dividends) and choosing board members. And board members also don't run the company - they oversee how the company is being run, and choose executives who will actually run the company. If a rich person simply buys 50% and doesn't desire to get personally involved, then they just vote for whatever board members seem apropriate and forget about it." I read about the 90-90-90 rule aka 90% of the people lose 90% of the money in 90 days.  Anything that happens in 90 days or less is speculation (effectively gambling), not investment. And the 90-90-90 thing sounds around right for inexperienced amateurs going up against professionals in that space. I don't know anyone who actually made significant amount money by investing in stocks or other financial products except those appearing in TVs. Lots and lots and lots of people do.  I heard that people who actually encourage common people to invest in stocks are stock brokers and fund managers who actually gain by the fact that more people invest.  No. It's true that lots of people will give you advice to by specific stocks or financial instruments that will earn them comission or fees, but the basic idea of investing in the stock market is very sound; ultimately, it's based on the ability of companies to create value and pay dividends. Could you please give some valid reasons to invest in stocks or other financial market. Thank you. Well, what else can you do with your money? Put it in an interest-bearing bank account? Effectively, you'll still be investing in the stock market, the bank is just taking most of the returns in exchange for guaranteeing that you'll never lose money even temporarily. "There's a huge difference between ""can an anverage person make a profit on the stock market"" and ""can an average person get rich off the stock market"". It is certainly possible for an average person to profit, but of course you are unlikely to profit as much as the big Wall Street guys.  An S&P 500 index fund, for instance, would be a pretty good way to profit.  People with high-powered tools may make a lot of money picking individual stocks, and may even make some choices that help them when the market is down, but it's difficult to see how they could consistently make money over the long term without the S&P 500 also going up.  The same applies, to varying extents, to various other index funds, ETFs, and mutual funds. I agree with littleadv that there is no single ""right"" thing for everyone to do.  My personal take is that index funds are a good bet, and I've seen a lot of people take that view on personal finance blogs, etc. (for whatever that's worth).  One advantage of index funds that track major indexes (like the S&P 500) is that because they are and are perceived as macro-indicators of the overall economic situation, at least you're in the same boat as many other people.  On one level, that means that if you lose money a lot of other investors are also losing money, and when large numbers of people start losing money, that makes governments take action, etc., to turn things around.  On another level, the S&P 500 is a lot of big companies; if it goes down, some of those big companies are losing value, and they will use their big-company resources to gain value, and if they succeed, the index goes up again and you benefit. In other words, index funds (and large mutual funds, ETFs, etc.) make investing less about what day-trading wonks focus on, which is trying to make a ""hot choice"" for a large gain.  They make it more about hitching your wagon to an extremely large star that is powered by all the resources of extremely large companies, so that when those companies increase their value, you gain.  The bigger the pool of people whose fortunes rise and fall with your own, the more you become part of an investment portfolio that is (I can't resist saying it) ""too big to fail"".  That isn't to say that the S&P 500 can't lose value from time to time, but rather that if it does go down big and hard and stay there, you probably have bigger problems than losing money in the stock market (e.g., the US economy is collapsing and you should begin stockpiling bullets and canned food)." No. You're lucky, maybe, but not really a successful investor. Warren Buffet is, you're not him. Sometimes it is easier to pick stocks to bid on, sometimes its harder. I got my successes too. It is easier on a raising market, especially when it is recovering after a deep fall, like now. But generally it is very hard to beat the market. You need to remember that an individual investor, not backed by deep pockets, algo-trading and an army of analysts, is in a disadvantage on the market by definition. So what can you do? Get the deep pockets, algo-trading and an army of analysts. How? By pooling with others - investing through funds. "Yes, they are, and you've experienced why. Generally speaking, stocks that pay dividends will be better investments than stocks that don't.  Here's why: 1) They're actually making money. They can finagle balance sheets and news releases, but cash is cash, it tells no lies. They can't fake it.   2) There's less good they can do with that money than they say. When a business you own is making money, they can do two things with it: reinvest it into the company, or hand it over to you. All companies must reinvest to some degree, but only a few companies worth owning can find profitable ways of reinvesting all of it. Having to hand you, the owner, some of the earnings helps keep that money from leaking away on such ""necessities"" like corporate jets, expensive printer paper, or ill-conceived corporate buyouts.      3) It helps you not freak out. Markets go up, and markets go down. If you own a good company that's giving you a nice check every three months, it's a lot easier to not panic sell in a downturn. After all, they're handing you a nice check every three months, and checks are cash, and cash tells no lies. You know they're still a good company, and you can ride it out.    4) It helps others not freak out. See #3. That applies to everyone. That, in turn means market downturns weigh less heavily on companies paying solid dividends than on those that do not.  5) It gives you some of the reward of investing in good companies, without having to sell those companies. If you've got a piece of a good, solid, profitable, growing company, why on earth would you want to sell it?  But you'd like to see some rewards from making that wise investment, wouldn't you?     6) Dividends can grow. Solid, growing companies produce more and more earnings. Which means they can hand you more and more cash via the dividend. Which means that if, say, they reliably raise dividends 10%/year, that measly 3% dividend turns into a 6% dividend seven years later (on your initial investment). At year 14, it's 12%. Year 21, 24%. See where this is going? Companies like that do exist, google ""Dividend Aristocrats"".  7) Dividends make growth less important. If you owned a company that paid you a 10% dividend every year, but never grew an inch, would you care? How about 5%, and it grows only slowly?  You invest in companies, not dividends. You invest in companies to make money. Dividends are a useful tool when you invest -- to gauge company value, to smooth your ride, and to give you some of the profit of the business you own. They are, however, only part of the total return from investing -- as you found out." When you own stock in a company, you do literally own part of the business, even if it's a small portion. Anyone amassing over 50% of shares really does have a controlling interest. No, you can't trade a handful of AAPL shares back to Apple for an iPod, but you can sell the shares and then go buy an iPod with the proceeds. Stock prices change over time because the underlying companies are worth more or less and people are willing to pay more or less for those shares. There is no Ponzi scheme because each share you own can be bought or sold on the open market. Dividends come from the company profits, not from other investors. On the other hand, money only has value because everyone believes it has value. There's the real conspiracy.