#Corporate Bonds vs Fixed Deposits

[margadarsi]

Comparing Short-Term vs. Long-Term Investment Plans for 5 Years

Investing with a 5-year time frame in mind requires a strategy that balances growth potential with risk management. Whether you're saving for a down payment on a house, a child's education, or simply looking to grow your wealth, here are some of the best investment options to consider:

1. Mutual Funds

a. Equity Mutual Funds

Equity mutual funds invest primarily in stocks. They offer the potential for higher returns but come with higher risk. For a 5-year horizon, consider large-cap or diversified equity funds. These funds invest in well-established companies with a history of steady growth.

b. Hybrid Mutual Funds

Hybrid mutual funds, also known as balanced funds, invest in a mix of equity and debt instruments. This balance helps reduce risk while still providing decent returns. They are suitable for moderate risk-takers.

2. Fixed Deposits (FDs)

Bank fixed deposits are a popular choice for conservative investors. They offer guaranteed returns and capital protection. The interest rates on FDs vary across banks, so it’s wise to compare and choose the best rates. While the returns may be lower compared to equity, the safety and stability make FDs a good choice for risk-averse individuals.

3. Public Provident Fund (PPF)

The Public Provident Fund is a long-term investment option backed by the government. It has a lock-in period of 15 years, but partial withdrawals are allowed after 5 years, making it suitable for medium-term goals. PPF offers attractive interest rates and the returns are tax-free.

4. National Savings Certificate (NSC)

NSCs are government-backed savings bonds that come with a fixed interest rate and a 5-year maturity period. They are a safe investment option with the added benefit of tax deductions under Section 80C of the Income Tax Act. The interest earned is taxable, but the safety and guaranteed returns make NSCs a reliable choice.

5. Corporate Bonds

Corporate bonds are debt securities issued by companies to raise capital. They offer higher interest rates compared to government bonds. For a 5-year investment, look for high-quality corporate bonds (rated AAA) to ensure lower risk of default.

6. Real Estate

Investing in real estate can be a good option if you have a substantial amount of capital. Over a 5-year period, property values can appreciate significantly, especially in growing urban areas. However, real estate requires careful consideration of location, market trends, and liquidity needs.

7. Stock Market

Direct investment in the stock market can yield high returns if done wisely. For a 5-year period, consider investing in blue-chip stocks—shares of well-established companies with a strong track record of performance. Diversify your portfolio to mitigate risks.

8. Gold

Gold is considered a safe haven during market volatility. Investing in gold ETFs (Exchange-Traded Funds) or sovereign gold bonds can provide good returns. Gold tends to appreciate over time and offers a hedge against inflation and economic downturns.

9. Unit Linked Insurance Plans (ULIPs)

ULIPs provide the dual benefit of insurance and investment. Part of the premium goes towards life insurance, and the rest is invested in equity or debt funds. They have a lock-in period of 5 years and offer the potential for market-linked returns.

10. Recurring Deposits (RDs)

Recurring deposits are similar to fixed deposits but allow regular monthly investments. They offer fixed returns and are a good option for disciplined savers who want to accumulate a corpus over 5 years.

Key Considerations

Risk Appetite: Assess your risk tolerance before choosing an investment plan. Equity and mutual funds offer higher returns but come with higher risk, while FDs and PPFs offer lower returns with higher safety.

Tax Implications: Consider the tax benefits and liabilities of each investment. Options like PPF and ELSS (Equity Linked Savings Scheme) offer tax deductions, while interest from FDs and NSCs is taxable.

Liquidity Needs: Ensure the investment aligns with your liquidity requirements. Some investments like real estate and PPF have longer lock-in periods, while others like mutual funds and stocks offer more liquidity.

Diversification: Diversify your investments across different asset classes to balance risk and return.

Conclusion

Choosing the right investment plan for a 5-year horizon depends on your financial goals, risk tolerance, and liquidity needs. A balanced portfolio with a mix of equity, debt, and fixed income instruments can help achieve optimal returns while managing risks. Always conduct thorough research or consult with a financial advisor before making investment decisions.

[tejimandiblog]

The Difference Between the Primary and Secondary Market

Are you new to investing and unsure how to navigate the capital markets? You have come to the right place. TejiMandi carries the legacy of Motilal Oswal Financial Services, as a direct subsidiary of the behemoth. As SEBI-registered portfolio managers, our teams of in-house experts have solutions to all your investing queries and are adept at provisioning tailored portfolio management services to you.

The capital market is a platform where buyers and sellers trade various financial instruments such as bonds, stocks, and other securities. It is a medium for transferring capital from investors to companies that need the money to finance business ventures and investments. The term ‘capital market’ includes in-person and digital trading spaces with further classification into primary and secondary markets.

Here’s an in-depth look into the primary market vs secondary market differences and their meaning. However, it is pertinent to understand the types of securities that investors encounter in capital markets before discussing primary and secondary markets. Let us have a look at that first.

Types of securities in capital markets

Capital markets primarily deal with equities and debt securities. Both equity and debt securities are forms of investments with different risks and returns for the investor. Here’s a more detailed explanation of the two:

Equity Securities: An equity security is traded on the stock market and represents the ownership interest of shareholders in a company or business venture. Equity securities translate to shares of capital stock, including shares of common and preferred stocks. Holding equity shares of a company means owning a portion of that company, and the shareholder is entitled to the company’s future earnings.

Although equity shareholders may profit from capital gains when they sell the securities, they may not receive regular payments. However, equity shareholders get some degree of control over the company via voting rights. Moreover, they get a share of the residual interest incase of bankruptcy.

Know more about investing in equities in our article on Equity Investments: Benefits, Considerations, And Must-Know Tips on the Teji Mandi blog.

Debt Securities: Unlike equity securities, debt securities entitle the lender to receive a stream of interest payments and other contractual rights, except voting rights, while requiring the borrower to repay the principal amount borrowed too. These are IOUs in the form of bonds and notes and represent the borrowed money that must be paid back with interest. Debt securities typically have specific terms stipulating the loan size, interest rate, debt maturity, and the renewal date.

Some examples of debt securities include fixed deposits, certificates of deposits, government and corporate bonds, and collateralised securities.

Types of Capital Markets: Primary Market v/s Secondary Market

Capital market transactions take place through primary markets and secondary markets. In other words, investors can buy and sell securities in two types of markets.

Primary Market

The primary capital market is where a company sells new bonds and stocks to the public for the first time. The initial public offerings – or IPOs – take place in the primary market.

The company that issues securities hires underwriters who help them correctly price their securities, buy those securities from them (which ensures all of their stock offerings are taken up), and then further sell them using their underwriting network. Say the underwriters, also known as book-running lead managers, determine the issue price of the stock at Rs. 100. Thus, investors in a primary market can buy the shares of the IPO at Rs. 100 directly from the issuing company. Any shares that are left in the market are purchased by the underwriters, thereby transferring the risk of buying the securities onto them.

The term primary market stems from the fact that investors can first-hand contribute capital to the company by purchasing the stock.

Secondary Market

If a primary market creates securities, a secondary market is where the securities’ trading occurs. Popularly known as the stock market, the secondary market includes the BSE, NSE, NYSE, NASDAQ, and all stock exchanges around the world.

Investors trade previously issued securities in a secondary market, but these transactions do not involve the issuing company. For example, if you buy a stock of Tata Consultancy Services (TCS), you are dealing only with another investor who owns shares in TCS. However, TCS has no direct involvement in this transaction. Read more about the primary and secondary market

[india7d]

100 popular topic related to investment in indian market

100 popular topic related to investment in indian market

we will discuses blow 100 topics in our next blogs certainly! Here's a list of 100 popular investment topics related to the Indian market: - Introduction to Indian Stock Market - Basics of Equity Investing in India - Navigating the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) - Investing in Indian Mutual Funds - Understanding Index Funds and ETFs in India - Indian Real Estate Investment: Trends and Opportunities - Investing in Indian Government Bonds - Fixed Deposit and Other Bank Investments in India - Indian Commodity Market: Overview and Trading Strategies - Demat Account and its Significance in India - Indian Derivatives Market: Futures and Options - Foreign Direct Investment (FDI) in India - Indian Startup Investments and Venture Capital - Initial Public Offerings (IPOs) in the Indian Market - Indian Taxation and its Impact on Investments - Indian Economic Indicators and their Role in Investment Decisions - Investing in Indian Small-Cap Stocks - Large-Cap vs. Mid-Cap Stocks: Pros and Cons - Indian Real Estate Regulation and Development Act (RERA) - Sovereign Gold Bonds in India - Indian Corporate Bond Market: Opportunities and Risks - Systematic Investment Plan (SIP) in Indian Mutual Funds - Growth vs. Value Investing in Indian Stocks - Investing in Indian Government Securities - Indian Currency Market: Forex Trading - Real Estate Investment Trusts (REITs) in India - Indian Banking Sector and Investment Opportunities - Mutual Fund SIP vs. Lumpsum Investment in India - Investing in Indian Infrastructure Projects - Tax-Saving Investments in India (e.g., ELSS) - Indian Real Estate Market vs. Stock Market - Best Performing Mutual Funds in India - Indian Commodity Exchanges: MCX and NCDEX - National Pension System (NPS) and its Benefits in India - Equity Research and Fundamental Analysis in India - Indian IPO Review and Analysis - Investment Opportunities in Indian Pharmaceutical Sector - Private Equity Investments in Indian Companies - Indian Mutual Fund Ranking and Selection Process - Investing in Indian Renewable Energy Projects - Top Indian Stocks to Watch in 20XX - Indian Real Estate Bubble: Myth or Reality? - Indian Auto Sector Investment Outlook - P2P Lending and Crowdfunding in India - Impact Investing in Indian Social Enterprises - Investment Strategies during Economic Downturns in India - Indian Information Technology (IT) Sector Stocks and Growth - Indian Retail Sector Investments and Future Prospects - Investing in Indian Education Sector - Indian Textile Industry: Opportunities and Challenges - Indian Housing Market: Trends and Forecast - Investment Risks and Mitigation Strategies in India - Indian Telecom Sector: Investments and Growth Potential - Investing in Indian Gold Market - Indian Steel Industry: Investment Analysis - Indian Agriculture Sector Investments - Investing in Indian Healthcare and Pharma Stocks - Indian Media and Entertainment Industry: Investment Opportunities - Real Estate Investment Strategies in Indian Tier 2 Cities - Indian Consumer Goods Sector Investments - Investing in Indian Oil and Gas Industry - Indian Cement Industry: Market Analysis and Investments - Regulatory Environment for Foreign Investors in India - Investing in Indian Hotel and Hospitality Industry - Indian Fintech Startups and Investment Landscape - Indian Power Sector Investments and Renewable Energy - Investing in Indian Biotechnology Companies - Indian Banking Sector: NPA and Investment Risks - Top Indian Multinational Companies for Investment - Indian Electric Vehicle (EV) Industry: Opportunities and Challenges - Investing in Indian Small and Medium Enterprises (SMEs) - Indian Aviation Sector: Investment Outlook - Indian Realty Investments: Metro Cities vs. Non-Metro Cities - Investing in Indian Defense and Aerospace Industry - Indian E-commerce Market: Investment Trends - Indian Railway Sector Investments and Privatization - Investing in Indian Software Services Companies - Indian Education Technology (EdTech) Startups: Investment Prospects - Indian Warehousing and Logistics Sector: Investment Analysis - Investing in Indian AgriTech Startups - Indian Government's Atmanirbhar Bharat Initiative and Investment Implications - Investing in Indian Artificial Intelligence (AI) Companies - Indian Gems and Jewelry Industry: Market Analysis - Indian Pharmaceuticals: Generic vs. Branded Drugs Investment - Investing in Indian Renewable Energy ETFs - Indian Fast-Moving Consumer Goods (FMCG) Sector: Investment Opportunities - Indian Real Estate Market and COVID-19 Impact - Investing in Indian Food Processing Industry - Indian 5G Technology Investments and Future Prospects - Indian Chemical Industry: Investment Trends - Investing in Indian Waste Management and Recycling Companies - Indian E-gaming and Online Entertainment: Investment Landscape - Indian HealthTech Startups: Investment Potential - Investing in Indian Artificial Intelligence of Things (AIoT) Startups - Indian Digital Payment Industry: Investment Outlook - Indian Education Sector: Online Learning and Investment - Investing in Indian Green Bonds - Indian Robotics and Automation Industry: Investment Analysis - Indian Cryptocurrency Market: Investment Opportunities - Investing in Indian Hydroelectric Power Projects Please note that the investment landscape can be dynamic, and it's essential to conduct thorough research and seek advice from financial experts before making any investment decisions. Read the full article

[wizelywizeup]

How To Get Started With Financial Planning

Starting as an independent individual, what you need first is a plan for your finances. That feeling of financial independence is surreal and might be overwhelming when you throw a party. Half of the month is left, and you do not have the money to survive?. How? Why did this happen? You may have gone overboard with your expenses this time. So how do you resolve this?

Financial planning is your answer. It will not only balance your spendings but might help you save a little more than expected for that rainy day.

Start saving in digital gold with as low as Rs 10!

Download Wizely

Let’s understand some basics of financial planning that are easily doable and help you save money.

Start Now

It’s never too early to do your financial planning. If you start today and continue for years, you might have double the amount you thought than if you had begun ten years later.

Save  

Each brick counts when building a home. Even if you have to save up Rs20 for that soda, it will be a part of your saving. A well-known concept called ‘Avacado Toast’ shows how saving small amounts can help you buy a house.

Make a Budget

Making a budget is crucial when you want to meet your financial goals. Monitor your expenses, creatively challenge yourself to make yourself stick to that budget you planned.

Also read: 15 Budgeting Hacks That Can Change Your Life

Control Debt

Once you start your independent journey with finances, banks are more willing to give loans and credit cards. While borrowing money is not bad, keeping it in check is essential, so your savings are not disturbed.

Buy Insurance

Be it car, accidental, life, or health insurance, it should be the top of your priority as it’s a great way to begin financial planning. With special offers from insurers and thorough research, you can buy the best for you and your family.

Fixed Deposits

The most often used option for saving a lump sum amount of money at once for higher interest on savings.

Also read: Investing vs. Saving: Which Should You Do, When, And How?

Public Provident Fund

Since it is a government scheme, this one counts as a safe option. It has a lock-in period of 15 years but with a guarantee of return in investment from the government.

National Pension Scheme

NPS is a combination of various investment schemes like Liquid Funds, Fixed Deposits, and Corporate Bonds. The motive behind this was to encourage them to save more post their retirement, and since it is under government, it is trustful to invest in.

Make a Will

To secure your loved ones’ future, making a will is the best option. Spare some time with a trusted attorney and write a choice that is according to your wishes.

National Savings Certificates

Majorly for small and mid-income investors, this is a government scheme as well. A savings bond that motivates investors to invest while saving money on tax can start with an investment of just Rs100 and increase it when they feel feasible.

Financial planning is the first step in wealth management. Therefore if you are in your 20s, now is the time to invest your time in it and save money for the future.

For more information, you can visit here

https://wizely.in/wizeup/financial-planning-beginners/

[ayushchandaksblog]

Are you are confused? Are you unable to decide on the best investment option between the two Corporate Bonds and Fixed Deposits ? Do not worry. FDs in India are a popular saving instrument and It is facilitated by private, nationalized banks, NBFCS, and other entities. Unlike other investment instruments, FDs have their own limitation.

[jerrymononela]

JERRY MONONELA – What is Stock Markets

Share Trading Basics

 Introduction:

Owning shares is one of the greatest tools to wealth creation you can find. Shares, apart from owning fixed property,

should form the cornerstone of any investment portfolio. You do however need a firm understanding of the stock market

basics before dipping your toes (and your money) into the sea of opportunity which is the stock market.

It is like having a business but not having to show up at work.

The interest of the average Joe has grown exponentially in the last couple of years. This can be attributed to the flow

(mostly freely accessible ) of information on economic affairs and stock specific

news. What was once a toy of the wealthy has now turned into the vehicle of choice for wealth creation. Technological

advances has put the opportunity of trading the stock markets at your fingertips wherever you might be.

 What are shares?

A share is simply what it’s name suggests - you share in the ownership of a company. It represents a claim on the

company’s assets and earnings. It is sometimes called stock, equity or shares but they all mean the same thing.

Holding a company’s shares means that you are one of the many owners (shareholders) of a company and have claim to

everything it owns. This claim is usually very small but you are entitled to your portion and hold your voting rights.

Shares were held in certificate form but electronically held shares have become the norm. All South African shares are

held by a CSDP (Central Securities Deposit Participant) in electronic format.

This makes it far easier to trade the shares at the click of a mouse button. Share certificates had to be taken to the broker and then to the transfer secretaries which made it and arduous task.

Being a shareholder does not give you title to the day-to-day running of the business. Your extent to which you have a say

in the company is limited to one vote per share at annual meetings where you vote for the board of directors. Being a

shareholder of South African Breweries does not entitle you to walking into their plant in Rosslyn and helping yourself to

a couple of beers or calling the Chief Executive Officer to share your ideas on how they should run the company.

Large institutional shareholders have the biggest say in the appointment of management and they have to increase the value of the company for shareholders.

Profits are shared in the form of dividends. Your claim on the assets is only relevant should the company go bankrupt.

An important feature of owning shares is your limited liability should the company not be able to pay it’s debt. No matter

what happens, the maximum value you can lose is the value of your investment in that company. Your personal assets are never under threat should the company go bankrupt.

 Company Funding- Debt vs. Equity.

Companies raise capital by debt financing (loan from the bank or issuing a bond) or equity financing ( selling part by issuing shares.

Issuing stock is advantageous as the company does not have to pay back the money or make interest payments along the way. The first issue of stock by a private company is called the initial public offering (IPO).

When you buy a debt investment such as a bond , you are guaranteed a return of your capital along with interest payments. By buying an equity investment you you assume the risk of the company not being successful. If the company goes bang you only get paid after the banks and the bond holders have been paid. Shareholders earn a lot if the company is successful but stand to lose their entire investment should the company fail.

There are no guarantees when it comes to individual stocks. Some companies pay dividends , but others may not. There is no obligation to pay dividends. You make money by the appreciation of the stock price.

Although risk might sound negative , there is a bright side. Taking on risk demands higher returns. That is why shares outperform bonds or bank savings.

 Types of shares.

There are two types of shares: common stock and preferred stock.

Common stock

When people talk about shares they usually refer to this type. Common shares represent ownership in a company and a claim (dividends) on a portion of the profits. Investors get one vote per share to elect board members who oversee the major decisions made by management. Common shares hold the biggest risk as the holders of this asset class will not

receive money until the creditors, bondholders and preferred shareholders are paid.

Preferred stock

Investors in preferred shares are normally guaranteed a fixed dividend but without the same voting rights of common shares. These shares are also callable and this means the company can buy back these shares at any time and for any

reason (mostly at a premium).

Different classes of stock

Companies can customize different classes of shares in any way they wish so as to give the voting power to a different group. One group may have 10 votes per share while another class will have one vote per share. Normally Class A or Class B stock etc.

How are shares traded?

Shares are traded on exchanges. Some exchanges are physical trading floors where traders seem to be running around

waving and speaking sign language in addition to loud screaming. This looks crazy but is actually quite orderly. The other type of exchange is virtual, composed of a network of computers where trades are executed electronically. This form of

trading is far more transparent than floor trading. The JSE closed it’s open outcry floor in 1997 and everything is now traded through a network of computers linking the exchange to the JSE’s virtual trading pits.

Exchanges facilitate the exchange of securities between buyers and sellers, reducing the risks of investment. There is a

primary market where shares are created (by means of an Initial Public Offering) while in the secondary market , investors trade previously-issued securities without the involvement of the issuing-companies.

The Johannesburg Stock Exchange.

About the Main Board

In 1886, the discovery of gold on the Witwatersrand led to a boom in mining and financial companies and a stock exchange was soon needed. And so began the Johannesburg Stock Exchange’s Main Board.

The JSE holds a treasured position as one of the top 20 exchanges in the world in terms of market capitalisation. The majority of this market capitalisation is based on the companies listed on the Main Board and the JSE’s top 40 stocks are also listed here.

These stocks are highly regarded by both local and international investors.

The Main Board houses the same sectors grouped according to the London Stock Exchanges XXXX. Dual listings are actively encouraged and are possible on all boards of the JSE.

A list of all Main Board companies can be found here.

Listing benefits Access to capital for growth: listing gives you the opportunity to raise capital to fund acquisitions as well as growth.

Boost your profile: listing generally heightens your company’s public profile with customers, suppliers, the media and investors. As a result more business opportunities become available to you.

Create value and liquidity for shareholders: because your company’s value is independently assessed, shareholders can realise their investment, liquidity is stimulated and your shareholder base may be broadened.

A listing allows you to facilitate broad-based black economic empowerment (BEE) deals, a prerequisite to effective corporate citizenship in South Africa.

You may offer share incentives to employees to encourage commitment and improve the quality of recruits.

Why the JSE?

The JSE is well positioned to help you leverage your listing to its maximum. In addition to the benefits above, listing on the JSE allows you to:

Enjoy local analyst coverage as well as high media interest.

Attract international investors who are easily able to trade in JSE-listed shares without any restrictions.

Trade your shares securely and efficiently on JSE TradElect™, the London Stock Exchange’s trading system.

Be eligible for inclusion in the FTSE/JSE Africa Index Series, thus creating additional exposure for your company both locally and internationally.

Marketing your business to investors with the assistance of the JSE Business Development team.

·         Dual listings

·         Dual listings brochure

 company on the JSE gives you the opportunity to:

Tap into local knowledge, skills and interest.

Use your listing as a springboard into the rest of Africa.

Access deep pools of capital relative to other African markets.

Use your shares as local currency for transactions.

Increase and diversify your company’s pool of liquidity

Facilitate compliance with South African government charters on broad-based black economic empowerment.

Is listing for you?

The decision to list your company needs to be made once you have realistically assessed your company, its management, resources, stage of development, long-term strategy, goals and future prospects. You would also need to consider the timing of a listing in terms of market conditions and where your business is at that point in time.

There are many specific requirements that you need to meet which are in the JSE Listing Requirements. These can be accessed on their website. We have three markets on which you could list: the Main Board, the Africa Board and the

Alternative Exchange (AltX). The decision to list on either market depends on factors like the size of your company, your funding requirements and what you would like to achieve with your listing. Listing may be just what you need to take your business to the next level. A typical main board listing requires 300 different shareholders with a spread of at least 20% and a 3 year proven profit before tax of R 8 million Rand.

What makes Share prices change?

Share prices change everyday compliments of market forces of supply and demand. Participants have different perceptions of a company’s potential earnings and are therefor prepared to pay different prices for a share. If more people want to buy a share(demand) than sell it (supply), then the price moves up. Understanding supply and demand is easy. What makes trading stock difficult is understanding what makes people like a certain share and dislike another.

Every investor has his own ideas and strategies. Some are just outright punters.

The price of a share is determined by what investors perceive it to be worth. The value of a company is it’s market capitalization which is simply calculated by share price multiplied by the amount of stock in free float. Matters are complicated by the price of a share which reflects the growth that investors expect in the future.

The most important factor in valuating a company is it’s earnings. Earnings are the profit a company makes. Without profit it can’t survive. Companies are required to report their earnings and the market watches these reports to determine future value. If the earnings surprise share prices jump and conversly when they dissapoint the stock prices fall.

Sentiment is a very important driver of price as was evident in the dotcom bubble. Tech companies saw their valuations shoot through the roof despite them not making a cent yet. These valuations did not hold and their values shrunk to a

fraction of the highest prices they achieved. There are numerous variables that influence price and investors are developing more and more to determine valuations. You might have heard of like price/ earnings ratio, while others have obscure names like Chaikin oscillator or moving average convergence divergence. So why do prices change? Nobody really knows but we know for certain that they are volatile and that creates opportunity. At the most fundamental level , supply and demand in the market determines share price.

- price times numberof shares in free float is the value of the company. Comparing just the price is meaningless.

- earnings affects investor’s valuation but other indicators are also used to predict the price.

- there are many theories that explain share price movement. There is however no one theory that can explain

everything.

Buying Shares

How do you buy and sell shares. You luckily don’t have to go into a trading pit and yell your order. There are two main

ways to purchase shares.

Using a broker

There are two types of brokers : full-service who supposedly offer expert advise and charge higher fees and discount brokers who execute without any add-ons.

With the advent of the internet trading platform most brokerage houses have changed to the latter. Anyone can now afford to invest in the market.

DRIPs

Dividend reinvestment plans allow investors to purchase stock directly from the company by reinvesting their dividends.

How to read a share quote

Any financial newspaper should have the following tables giving you share price info:

This clip was taken from US newspaper so quoted in Dollar but SA shares are quoted in SA cents per share.

Columns 1 & 2: 52-Week High and Low - These are the highest and lowest prices at which a stock has traded over the previous 52 weeks (one year). This typically does not include the previous day's trading.

Column 3: Company Name & Type of Stock - This column lists the name of the company. If there are no special symbols or letters following the name, it is common shares. Different symbols imply different classes of shares. For example, "pf" means the shares are prefs.

Column 4: Ticker Symbol - This is the unique alphabetic name which identifies the stock. If you watch financial TV, you have seen the ticker tape move across the screen at the bottom, quoting the latest prices alongside this symbol. If you are looking for stock quotes online, you always search for a company by the ticker symbol. If you don't know what a particular company's ticker is you can search for it at http://www.jse.co.za/How-To-List-A-Company/Main-Board/Main-Board-Listed-companies.aspx

Column 5: Dividend Per Share - This indicates the annual dividend payment per share. If this space is blank, the company does not currently pay out dividends.

Column 6: Dividend Yield - The percentage return on the dividend. Calculated as annual dividends per share divided by price per share.

Column 7: Price/Earnings Ratio - This is calculated by dividing the current stock price by earnings per share from the last four quarters. For more detail on how to interpret this, see the P/E Ratio explanation in later chapters.

Column 8: Trading Volume - This figure shows the total number of shares traded for the day, listed in thousands. To get the actual number traded, add "000" to the end of the number listed.

Column 9 & 10: Day High and Low - This indicates the price range at which the stock has traded at throughout the day.

In other words, these are the maximum and the minimum prices that people have paid for the stock.

Column 11: Close - The close is the last trading price recorded when the market closed on the day. If the closing price is up or down more than 5% than the previous day's close, the entire listing for that stock is bold-faced. Keep in mind, you are not guaranteed to get this price if you buy the stock the next day because the price is constantly changing (even after

the exchange is closed for the day). The close is merely an indicator of past performance and except in extreme circumstances serves as a ballpark of what you should expect to pay.

Column 12: Net Change - This is the cents value change in the stock price from the previous day's closing price. When you hear about a stock being "up for the day," it means the net change was positive.

You can also get stock quotes (delayed) from websites like www.jse.co.za or www.moneyweb.co.za

A bid is the price someone is prepared to pay and the offer(ask) price the price at which someone is prepared to sell.

When these two meet they transact and a deal is created.

Bulls and bears.

A bull market is when everything in the economy is great, people are finding jobs, gross domestic product (GDP) is growing and share prices are in a rising trend. Picking shares to buy in a bull trend is relatively easy as most go higher.

These strong bulls mostly lead to overvalued stocks which is dangerous to the investor. Greed invariably feeds the bulls to just keep on paying any price. If a person is always optimistic about share prices risign they are called bullish or a bull.

A bear market is the opposite of a bull market. Times when the economy is bad and recession looming are refered to as bear markets. A person with a pessimistic point of view or belief that stock prices will come down rapidly is refered to as bearish or a bear.

Chickens are what the name implies: a person who is so risk averse that they don’t commit any money to the market and rather invest in money-market instruments.

Pigs are highrisk takers and by on hot tips etc. fueled by their greed. Proffesional traders love pigs as it is often from their losses that bulls and bears reap their rewards (profits).

There are numerous styles of trading or personalities affording everyone opportunity to make money. Bulls and bears are in constant battle with pigs adding to volatility. The trick is NOT to invest in any instrument you do not fully understand.

If you don’t do your homework you will get hurt and lose money!!

Summary

- Having shares in a company give you claim on the assets and earnings as well as voting rights.

- Share are equity , bonds are debt. Bondholders are guarenteed a return whereas shareholders take on risk of the company not being succesful therefor requiring a higher return on their capital.

- You can lose all your money in shares. You can also make lots if you pick the right share.

- There are two types : common and preference shares and companies may create different share classes.

- stock markets are the places where buyers and sellers meet to exchange shares.

- The JSE is the major stock exchange in Africa

- Share price fluctuate due to the forces of supply and demand. Most important factor influencing price is earnings

- There is no hard and fast way to determine or explain price movement

- To buy shares use a broker or DRIPs

- Stock quotes and tables are easy to read - don’t be afraid of all the detail

- Bulls make money, bears make money but greedy pigs get slaughtered.

[financerecovery]

Investment Benefits Vs Traditional Saving System

Australia is a country of investors, with nearly half of the adult population holding investments in addition to their super, reveals a recent survey. - payday loans

There has always been a debate among people when it comes to investing vs. traditional savings system. Which is better? What should you choose?

Considering what we have come across in 2020, individuals feeling anxious about investing makes complete sense, and for those in ‘Team Savings’, this could be the win they were looking for. Investing can be somewhat confusing at times. However, a short glimpse at the historical data reflects why investing always wins in the investing vs. savings debate.

A quick look over the past decade (2010 to 2020) indicates that S&P/ASX 200 grew 130% between 2010 and 2020. That’s just one aspect of this debate. We have put together a list of the benefits of investing instead of savings for individual investors. Let’s get started.

  5 Benefits Of Investments Over Traditional Savings

  1. Higher Returns

Starting with the first benefit on our list, higher returns is one of the top reasons why people should invest instead of saving their money in a traditional account. Considering the fact that S&P/ASX 200 witnessed a growth of 130% between 2010 and 2020, you could have more than doubled your money in less than 10 years. When you compare the same with savings accounts, the latter falls much short. Traditional savings accounts offer an APY of under 1%. Your money loses its purchasing power over time. Additionally, you don’t have any control over your investment strategy. You’re limited to a steady, low rate of return.

2. Ability To Beat Infalation

Inflation is the enemy of wealth. If your money is parked in savings accounts with interest rates lower than that of the current inflation rate, you’re already getting poorer with each passing day. In order to preserve your financial resources, if not grow them, you need to put your funds in an investment product that beats inflation. Luckily, most of the investments, stock market-related or inflation-protected term deposits, offer inflation-beating results. You can be rest assured that you’ll have the same financial capacity over the coming years. For people prioritizing savings over investing, the traditional interest rates on a savings account are already below the prevalent inflation rates across most of the last decade.

3. Create A Sizeable Nest Egg

One of the primary intents of investing is to create financial resources for long-term goals, such as retirement, real estate, child’s education, or starting a business. You can achieve your financial goals by creating an investment strategy that aligns with these goals. For instance, if your goal is to save for retirement, investing consistently through mutual funds (index funds) will help you build a sizeable retirement nest egg. Similarly, you can opt for the security of bonds to save for short-term financial goals. You don’t have to take additional risks for your short-term financial requirements. You can do the same through savings accounts, but you’ll have to save a lot more than what you would otherwise invest. We tried multiple scenarios, and in every single one of them, you’ll have to invest 2x, 3x, and even 5x times the money to achieve results similar to investing.

4. Strategic Diversification To Reduce Risks

One of the primary concerns of individual investors is the risk involved in market-related investments. There is no doubt that stock market investments are subject to market volatility. You can grow your money manifold, but there’s always a possibility of losing your funds in stock market products. However, diversification can help you reduce your investment risks. Financial advisors recommend investors to add stability to their portfolio by dedicating a portion of their portfolio to safer products, such as bonds and term deposits. A diversified portfolio will not only help investors lower their risk, but they’ll also earn decent returns over time. Conventional savings products, on the other hand, are protected against any risk. You don’t bear additional risk, but the downside is a below-average rate of return.

5. Higher Liquidity

Stock market investments provide higher liquidity in comparison to traditional savings products. All you need to do is to sell your stocks, or units in case of mutual funds, to withdraw your investments. Most of the market-related products do not have lock-in periods (venture equity is one of the exceptions). However, you need to be careful about your effective tax rates or the impact of short-term capital gains taxes on your returns. Most traditional savings products, such as term deposits, bonds, have specific maturity periods. Your funds are locked for the said duration. You may incur penalties for premature withdrawals of traditional savings.

  Understanding Different Types Of Investments

Now that you are aware of the benefits of investing over savings let’s have a look at some of the most popular investment products;

• Stocks: Stocks are among the most popular investment options. When you purchase a stock, you receive fractional ownership in a company. There are several benefits of stock ownership, starting with getting a share of the company’s profit or surplus cash as dividends. Secondly, as the company grows, the price of its stocks grows in proportion, thereby giving long-term capital growth to investors. In order to invest in stocks, you’ll require a brokerage account for trading. You can choose an individual brokerage account or have trained financial advisors to manage your investments.

• ETFs: ETFs or exchange-traded funds are baskets of different financial assets packaged into a single product. Unlike mutual funds, you can trade ETFs like any other stock. ETFs provide the diversification you expect from a mutual fund without putting any limitations on the trading timeline or hold periods. Another benefit of ETFs is their low expense ratios. While the average expense ratio of ETFs listed on ASX 200 stands at 26 (0.26%) basis points, you can always find ETFs with expense ratios in-line with 10 to 20 basis points. You’ll need a brokerage account to purchase ETFs.

• Mutual Funds: Mutual funds are pools of investor money that invest in various assets, including stocks, bonds, and fixed-income instruments. You can choose mutual funds that target specific industries, asset classes or tracks a wider stock market index. In comparison to ETFs, mutual funds have a higher expense ratio. Some mutual funds may have a lock-in period, so make sure to understand the terms.

• Bonds, term deposits: Bonds and term deposits are fixed-income instruments that provide consistent returns against your capital. Starting with bonds, these could be treasury bonds, municipal bonds, or even corporate bonds. The idea behind bonds is to offer fixed growth to investors. When investing in bonds, make sure they’re investment grade (corporate bonds with BBB or higher ratings). Term deposits are bank deposits with specific terms. You can choose a term deposit term between three months and five years (longer in some cases). Term deposits with longer terms offer higher returns. Find out about the insurance status before opening a term deposit with a bank.

• Futures, Options: Futures and options are sophisticated investments suitable for investors with a decent understanding of the financial markets. In simple words, a futures contract is a promise you make to purchase or sell a commodity or stock at an agreed price in the future. An options contract provides the owner with a choice to buy or sell a stock or commodity at a specific price while the contract is active. There is no obligation to make a transaction in an options contract.

  What Are The Different Types Of Investment Accounts?

Choosing the right type of investment account is a critical aspect of your investing journey. Here is a list of some of the available options;

Investment Accounts

Investment accounts are managed financial accounts where advisors take care of investing for you. You can set financial goals, risk profile with these accounts. Depending on your portfolio, investment firms provide dedicated financial advisors.

Retirement Accounts

For individuals investing for retirement, there are different types of retirement accounts available, including Roth IRAs, Traditional IRAs, and retirement solutions for businesses (SEP IRAs, SIMPLE IRAs) etc.

Brokerage Accounts

Brokerage accounts are required for trading. You can choose between managed and unmanaged brokerage accounts. Managed brokerage accounts come with experienced financial advisors trading on your behalf. There are some minimum investment requirements and advisory fees associated with brokerage accounts.

For More Info: business funding

[waylonjaid391-blog]

Home Equity Vs Refinance - Time For a Rematch

There is a fight, a tug-of-war if you will, in between savers and customers in this nation.

Savers Lament

On the saver's side, conditions are dreadful. Rate of interest on certificates of deposit (CD) have dropped considerably to the point where the typical rate for a 1-year CD is 0.55% and merely 1.63% for a 5-y CD.

Review that for a bit ... your money locked-up for 5 years earning just 1.63%!

Other cost savings vehicles are having a hard time too. For instance, a popular fund that contains business bonds from Wells Fargo, AT&T, Wal-Mart, and other blue-chip American companies has a typical maturity of 12 years and presently yields about 3.75%.

That's 3.75% of taxable interest income. Assuming your tax rate is 33%, you're entrusted an efficient, after-tax yield of 2.5% which, my good friend, is less than the historic inflation average of 3%.

So, while your bond investment is much better than money in the bank and safeguards you to some degree versus inflation, you still end up with 0.5% lower buying power every year.

So savers can't be too happy about this.

While Customers Rejoice

Borrowers, on the other hand, are having the time of their lives. Last week, the typical 30-year fixed-rate mortgage struck its lowest level of 4.19%. The kicker here is that home loan rates must actually be more than 0.5% lower - in the 3.8% variety - based upon their connection with interest rates on Treasury bonds.

However, rates are unlikely to go much lower so here's a suggestion: If you are in the market to re-finance, waiting is most likely not going to assist you much.

Furthermore, clients of mine are obtaining millions at 2.15% to money their company activities.

Appears a Little Unfair

Without taking a moral position, it does appear a bit unreasonable that savers, who in a sense are the "good guys" building wealth for their future, contributing capital for financial growth and conserving for a rainy day, are being punished for the actions of careless debtors and greedy lending institutions. Customers got in over their heads, didn't take sensible safety measures, and are now getting loan adjustments and lowered rates on the cash they owe. Banks experienced enormous losses due to the fact that of bad financing practices and caused this drop in rates to ultra-low levels.

Nevertheless, this sort of discussion doesn't get us anywhere. What has actually happened, has actually happened - fair or unfair.

So where do we go from here, and how do we benefit from all this?

What Borrowers Can Do

Have a look at your finances from a borrower's viewpoint.

First: refinance your mortgage NOW if you can because rates most likely aren't going to fall much lower.

Second: shop, store, shop for a better rate on your credit card. Loaning expenses are dropping all around so why should you pay the same old high rate on your charge card? Find banks that are starving to lend you money such as smaller sized institutions and Cooperative credit union, and prevent mega-banks that usually have all the money they need.

Third: secure an organisation loan if you need the cash. Banks are loosening up and making loans at fairly low rates that are extremely compelling regardless of the risk of slower company in this weak economy.

However, utilize sound judgment and profundity as you take on more financial obligation. Handle "good" debt that funds your home purchase or properties that value in value. Stay away from taking on "bad" debt for depreciating possessions you can ill pay for such as a brand-new vehicle or boat. If you must handle "bad" financial obligation, ensure it is short term and pay it off very quickly.

What Savers Can Do

Now the tough part: finding offers as a saver.

First: search for a longer-term CD that will change greater if rates increase. There is little worse than locking your money in a 5-year CD at 1.50% new fidelity funding bbb just to see rates rise to 5% 2 years from now.

2nd: consider purchasing corporate bonds with maturities of 5 years or less. These bonds still yield more than CDs, however make sure you know what you are buying - if the corporation goes bankrupt, you might lose a good piece of your "safe" financial investment.

Third: consider buying high dividend-paying blue-chip stocks. Warren Buffet just recently said that stocks are cheaper than bonds right now, and he's right. There are numerous strong business out there whose dividend yields are above 3%. For example, Altria currently has a dividend yield of 6% and a solid history of constant dividend payouts.

So ... it depends on you to be a winner or loser in the savings and borrowing video game. All you need to do is know the truths, choose to act, get on the phone or in your cars and truck, and begin getting your affairs in order.

[righthorizons-blog1]

Mutual Funds Better Than FD?

Mahesh is 31 years and works as a lecturer in a top private college. He is well paid and earns Rs 13 Lakhs a year. Mahesh has always invested in FDs and the reason is simple. FDs are safe and offer decent interest. Mahesh stays far away from mutual funds as he believes they invest in stocks making them extremely risky. Is Mahesh Right? Do mutual funds only invest in stocks?

When you say mutual fund, the first thing that come to mind is the equity mutual fund. Mutual funds are not all about stocks. They do invest in fixed income instruments. Let’s take a close look at fixed maturity plans also called FMPs, a type of Mutual Fund and how they are better than fixed deposits.

FMPs are closed-ended debt funds with a fixed maturity period normally just over 3 years to take advantage of the long term taxation. You can invest in FMPs through a New Fund Offer or NFO. Closed-ended means the FMP has an opening date and a closing date and you must invest within this time. FMPs invest your money in money market instruments like certificates of deposits, commercial paper, corporate bonds, treasury bills among others. They invest in debt instruments and you can check the credit rating before investing.  

Mahesh doesn’t like risk in investment. Mahesh asks only this question? Are FMPs safe like FDs? In FDs you already know the maturity value of the invested amount at the time of investment itself, as interest rate is fixed. FMPs offer only indicative yields, but the Yield to Maturity of the portfolio is disclosed regularly. FMPs also invest in safe debt products. Infact, some of them invest into PSU and Bank deposits/bonds only. You can also choose an FMP with a high credit rating. Though the NAV is reported daily and may vary in line with movements in interest rates, if you hold to maturity, the returns are largely fixed.  

If you want higher returns than FDs and are willing to bear a slightly higher risk, then invest in FMPs. FMPs are low risk investments compared to equity Mutual Funds. FMPs are listed on the stock exchange, but liquidity may not be available at all times on the exchange and hence are less liquid than FDs.

Mutual Funds vs FDs

When it comes to taxes, FMPs score over FDs, especially if you fall in the highest tax slab. The interest earned in FDs is added to taxable salary and you are taxed as per your tax bracket. Mahesh falls in the 30% tax bracket and FD interest income is taxed at the highest rate or marginal rate of tax. In FMPs, taxation depends on the type of fund. Choosing the dividend option means you bear the dividend distribution tax, DDT of 28.84%, which is slightly lesser than the marginal rate of tax on FDs. It’s in the growth option of FMPs where tax is saved.  

If you quit the FMP before 36 months, gains called short term capital gains are added to taxable income and taxed asper tax bracket. If you stay invested for 3 years or more, gains are called long term capital gains which attract 20% tax with the indexation benefit. Indexation inflates the purchase price of the FMP, saving tax.

If Mahesh invests Rs 10 Lakhs in FDs of 3 year tenure, the interest earned is taxed at the highest tax rate of 30%. If the FD offers 7% interest, this translates to a post-tax yield of 5%, which isn’t much. Lets say Mahesh Invests Rs 10 Lakhs in an FMP of same tenure. FMPs can give returns of around 7.25-7.5% a year, though returns aren’t guaranteed. With the indexation benefit, post tax returns are nearly 1.25-1.75% higher than FDs. This makes FMPs a better investment than FDs on a post tax return basis. 

Will Mahesh invest in FMPs over FDs for higher returns?  Investing in FDs largely erode your wealth if you consider impact of taxes and inflation. (ie. if you are in the higher tax brackets.)  FMPs are quite safe, especially if you chose a fund that invests in quality debt. FMPs are a smarter option, and may just help you beat inflation on a post tax basis.  That’s a call that Mahesh can take if liquidity is not a requirement for him.

[nntodayblog]

Saving for a new house or car? Here’s how to grow your nest egg faster

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You wouldn't necessarily know it from watching the ads on tv — but investing isn't just about retirement. Most of us have short-term goals as well — the down payment for a home or a new car, a dream wedding, a special vacation or your kids’ education. You can invest for those as well, just not in the same way. Although the stock market has, historically, proven to be a good home for long-term investments, there are other places you can invest if your time horizon is shorter. The rewards typically aren't as great. Then again, neither is the risk.

Determine your time horizon

After you pin down your goals, determining your time horizon is a “critical first step,” says Greg McBride, chief financial analyst at Bankrate.com. “That time horizon is going to dictate how conservative you need to be with the money or how much risk you’re able to take on in the pursuit of higher return.” If you’ll need the money you’re saving within five years, it’s often best to go with a lower-risk investment. And if you’re wondering why you shouldn’t just keep non-retirement money in your savings account? An emergency fund (ideally three to six months of expenses) is important to have on hand — liquid and ready to go at any time — and your savings account is a great place for that. But when it comes to money you aim to put towards your goals, inflation is one of the biggest reasons to consider investing your cash.

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What You Need to Know About Renting Vs. Buying a House

02:26

Dive in sooner rather than later to beat inflation

Savings account interest rates at big banks have been hovering around 0.09 percent (that's right 1/10th of 1 percent). Inflation — when the purchasing power of your money falls as prices for goods and services rise — is usually around 2 to 3 percent per year. That means that the value of your money is still decreasing over time. “Over longer periods of time, inflation is going to eat away at your buying power, so at the very least, you need to invest in a way that preserves that buying power,” says McBride. That doesn't mean you're out of options. “[Even if you're] very conservative [you] can still get more growth than a savings account and should be able to beat inflation,” says Eric Anderson, first vice president and financial advisor at RBC Wealth Management.

Related

Good Cents

How to sock away $1,000 in 90 days

If you’ve got a shorter time horizon…

When it comes to “safer” investments, it’s best to choose something where the principal amount of your investment is protected, says Jim Wang, founder of Wallet Hacks. One way to do that is by shopping around for a better savings or money market account than average. Although the average savings accounts are (as we noted) paying peanuts, the best are paying almost 20 times that much. You just have to search for them on a website like bankrate.com or gobankingrates.com. A certificate of deposit (CD) is another option to consider. CDs are savings certificates issued by a financial institution with fixed interest rates and maturity dates. Right now, you can find a 2-year CD paying around 2%. There is a penalty for "breaking a CD" or withdrawing the money before the agreed-upon date. But as long as you withdraw after the maturity date, you get to keep the principal investment and the interest you gained. Short-term government or corporate bonds are another conservative option. You’re essentially providing a loan at a fixed interest rate, and the issuer is promising to pay back both the principal and the interest. As of the middle of March, 2-year Treasury bills were paying about 2.3% (Government bonds have tax-advantages as well.)

Related

Do It BETTER

How to save more money this year

If you’re willing to do a little leg work…

Finally, you may want to take a look at high interest rate checking accounts. No, they're not typical savings vehicles. But some of them pay significantly more. High yield checking accounts have account minimums, not maximums, because they don't want to pay these high interest rates on unlimited sums. They typically require you to pay one bill automatically out of the account or receive one payment by direct deposit into it — and they require you to use your debit card for purchase at least 10 times each month. (They make their money on swipe fees.) Right now, for example, Blue Credit Union is paying 4% on balances of up to $15,000. Keep close to that in the account for a year and you've netted $600. Magnify Money and Bankrate both maintain lists of some of the best paying high yield checking accounts; be sure to check them both, they have different listings.

With Hayden Field

GET MORE SIMPLE MONEY HACKS THAT'LL HELP YOU SAVE

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What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

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What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Immigration Issues And Personal Injury Defense

Offering Employee Benefits

How To Divorce Proof Your Business

What Is A Blind Trust?

Asset Division In Divorce

Utah Probate Code 75-7-811

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Source: https://www.ascentlawfirm.com/what-is-a-private-placement-of-stocks/

[mayarosa47]

What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Immigration Issues And Personal Injury Defense

Offering Employee Benefits

How To Divorce Proof Your Business

What Is A Blind Trust?

Asset Division In Divorce

Utah Probate Code 75-7-811

Ascent Law St. George Utah Office

Ascent Law Ogden Utah Office

from https://www.ascentlawfirm.com/what-is-a-private-placement-of-stocks/

from Criminal Defense Lawyer West Jordan Utah - Blog http://criminaldefenselawyerwestjordanutah.weebly.com/blog/what-is-a-private-placement-of-stocks

[aretia]

What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Immigration Issues And Personal Injury Defense

Offering Employee Benefits

How To Divorce Proof Your Business

What Is A Blind Trust?

Asset Division In Divorce

Utah Probate Code 75-7-811

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Ascent Law St. George Utah Office

Ascent Law Ogden Utah Office

Source: https://www.ascentlawfirm.com/what-is-a-private-placement-of-stocks/

[gonnagoandrunwiththehorses]

What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Immigration Issues And Personal Injury Defense

Offering Employee Benefits

How To Divorce Proof Your Business

What Is A Blind Trust?

Asset Division In Divorce

Utah Probate Code 75-7-811

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Ascent Law St. George Utah Office

Ascent Law Ogden Utah Office

Source: https://www.ascentlawfirm.com/what-is-a-private-placement-of-stocks/

[melissawalker01]

What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company. What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

Shares

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Immigration Issues And Personal Injury Defense

Offering Employee Benefits

How To Divorce Proof Your Business

What Is A Blind Trust?

Asset Division In Divorce

Utah Probate Code 75-7-811

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Ascent Law St. George Utah Office

Ascent Law Ogden Utah Office

from Michael Anderson https://www.ascentlawfirm.com/what-is-a-private-placement-of-stocks/ from Divorce Lawyer Nelson Farms Utah https://divorcelawyernelsonfarmsutah.tumblr.com/post/621982406425067520