Value of a Share

Theoretically, the value of a share is a measure of the expectation of the size of the dividend that the directors will declare at the end of their financial year. Much of the market fluctuation is, however, the result of investors seeking to make profits from trading in the shares rather than owning shares simply for the income they provide.

There can be few hobbies more absorbing than playing the stock market and one reads of people who have made their first million this way. One does not, however, read of those who lost their shirts so play the market by all means. However, amateur or experts, stocks and shares or horses, only gamble what you can afford to lose. Look for the names of companies you know something about and note how they have moved.

Original (Par) Value

Most newspapers show this by indicating whether the price has gone up or down during the previous day’s trading. Try to find out what the original (par) value of the shares were; this would be the theoretical original price of the shares.

It is not unusual to find shares that have been around for a long time to have a par value of, say, 100 pence now being quoted at 500 pence. This is not so much a case of the market thinking the company is marvelous, but more the way in which shares in limited companies tend to keep pace with inflation.

One needs to study a company’s share price over a period of time and to compare it with the theoretically, such as the Financial Times Index or the Dow Jones Index, in order to assess what the market thinks of how that particular company is being run.