Buying Stocks and Shares for Beginners
When you buy a company's shares it gives you, the buyer, a stake in the company and the right to be paid a proportion of its profits in a payment known as the dividend.
Figures show that rarely do shares underperform government fixed interest bonds over any rolling ten-year period.
The following shows the relative performance of different investments between 1990 and 2000:-
Investment trust (with dividends reinvested) +240% Building society +90% House prices +20% Inflation +40%
The 1990's were a great period for share growth, but it can be seen from the above that buying shares can be a very lucrative way to invest your money.
Inflation is the name given to the process by which the price of goods moves upwards. It is thought that it is due to the circulation of too much money in the economy.
Inflation erodes the value of savings. Any investment needs to grow by at least the rate of inflation, or in real terms the value of that investment will be reduced.
As shares provide a stake in a company, they should be immune to the creeping effect of inflation.
Before 1900 the rate of inflation was neglible.