QUESTION: I really want to start buying shares from local companies, even maybe from foreign companies like Amazon, but really I am looking at next year, by God’s will. How much money would I have to invest in order to get back what I invested, plus earn 50 per cent profit on what I invested?

– Juleen

FINANCIAL ADVISER:

Investors do not buy shares directly from companies – not even in initial public offerings. In such cases, they buy from the stockbroker handling the issue and other selling agents. The company is then listed on the Jamaica Stock Exchange (JSE) if it satisfies the requirements for listing.

Thereafter, the shares trade on the stock exchange. Owners of shares sell to individuals, companies, pension funds and other buyers through the stockbroker of their choice. The stock-broking companies are dealer-members of the JSE. It is their representatives who execute the trades on the stock exchange. Trades are executed electronically.

 

PURCHASING STOCK

 

If you are able to do your own analysis to determine which stock to buy, you may make your decision and give instructions to your broker indicating the amount of stock you wish to purchase and the price you are prepared to pay. There is no guarantee your broker will succeed in buying the stock for you. It is quite possible that the supply may be less than the demand or that the price may move above your preferred price.

If you are not able to determine which stock to buy, there are investment advisers at the stockbroking companies who can help you make that decision.

The individual stockbroking companies determine the minimum sum that their clients can invest through them, but the size of the investment is not what determines the level of success of the investment.

How well the investment turns out depends on the particular stock you select and the state of the market. If a company is making good profits and the outlook for making good profits in the future is positive, the price of its stock will very likely increase and make it possible for the investor to make a profit.

Sometimes investors make a very good profit in a short time. The price of the stock may double in a year or less, but it may take years to double in other cases. In fact, it may not double at all if the company does not do well.

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