FundRobot » Trust Funds » how do you get money on shares UK?

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If you buy shares and don't sell them how would you get money

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when the company pays any dividend you get the dividend in cash or when the dividend is payd in shares you need already have enough shares to get the dividend payd in share(s)

example dividend is 10 pence after dividend tax you get 9 pence

example when having 50 shares and you need to have 50 shares for getting one new share after the dividend payment you have 51 shares
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companies pay dividends on shares to shareholders, dependiong how well the compay performs, normally paid twice a year. If the company is performing well you will get a higher dividend per share, the share price often then increases as more investors want a higher dividend return in the future, so you can make more money if you sell the shares.
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No certainty that a company pays dividends, as previously suggested, although many do. Selling, as well buying at the right time, is fundamental in share dealing; it is where the real money is gained or lost.
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The company pays dividends on its shares. So that's kind of like getting interest on a bank account. If they are preference shares, that actually IS like interest - you know what rate you will get, and the only time you won't get your dividend is if it is doing so badly that it can't afford to pay.

But most shares are ordinary shares and you have no guarantee of getting a dividend at all. It is up to the company whether it pays one twice a year (there's usually an interim dividend half way through its financial year and a final dividend once it has worked out its end of year accounts) and how much it will be. The company may have made a big profit that year, but it's still up to it how much of that to keep for investing in the business and how much to give away to the shareholders.

A big company we've all heard of will be pretty much guaranteed to pay a dividend twice a year, though you will still have no idea how much it will be until they actually announce it.

Gerry Attrick is right - buying and selling at the right time IS where the real money is made. But to be able to do that, you need to be interested enough to spend time looking at where the stock market is going, keep an eye on it, and sell when you think it's right. Or if you have a huge amount of money, you could pay a stockbroker to do it for you and advise on what to buy and when to sell.

Which is why unit trusts exist. You really need to spread your money between companies to reduce the risk of one of them collapsing and taking your savings with it, and if you're going to buy shares directly, you've got to take into account the buying and selling costs - banks and stockbrokers charge fees for doing it. So it's not economic to buy and sell tiny numbers of shares at one time, say less than a few hundred pounds or so. What a unit trust does is put your money together with other people's money so that together you have a big fund that the fund manager can actually do that with. And it's the fund manager's full-time job to keep an eye out and buy and sell when they think it's right. There are many unit trusts so you can choose what you want your money to go into - different parts of the world or different kinds of company.

Units in a unit trust are kind of like shares in that they go up and down in value too, and they also pay out twice a year except it's called distributions instead of dividends. They work the same as dividends for tax.

The funny thing is that one kind of unit trust called an index tracker performs best 75% of the time. What an index tracker does is just buy all the shares on the FTSE stock market index, so it's just buying into the 100 biggest companies in the UK. This is also really cheap in fees because the fund manager has nothing to think about. I like it and have done well out of it. Unless you really do have thousands of pounds to play with, it's the best way to go.
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