How to purchase shares

Generally speaking, every person purchasing securities makes investments in his/her own future. The sooner it is done, the better it is for this person. Our old age is secured by pension contributions in some way. However, if there are available funds, it is better to purchase shares or bonds of a prosperous Kazakhstani company instead of purchasing some clothes, household goods or even a car. Any purchase becomes unfit for use or needs ongoing repairs with the lapse of time. But securities tend to rise in price and, therefore, to enrich the holder and his/her children.

Securities are divided into two main categories: equity (shares) and debt (bonds).

Equity securities or shares specify the shareholder’s interest in the company’s property. They provide the right to dividends.

Shares can be preferred and ordinary. Preferred shares give the right to receive the guaranteed income regardless of the fact whether the company earned profit or not, and the superior priority in payment of dividends upon liquidation. But the preferred share does not give the right to manage the company. The ordinary share gives the right to participate in management of a company and property disposal as well as to receive dividends if the general meeting of shareholders has decided to pay dividends on ordinary shares. In this case, investments in shares are attractive not only for the purpose of dividend receipt but also participation in company’s management.

However, if you have less than 5% of the shares, it is unlikely that your opinion will count much when making important decisions. Shares are attractive because in addition to dividends and the coupon these instruments are subject to price changes, i.e. the price of the securities changes during the time of security circulation as opposed to deposits in which case proceeds are fixed and do not change.

So, the price may go both upwards and downwards but that is the advantage of the security over deposits as the security allows for receiving of the additional proceeds from the price increase.

The fee for such an opportunity is the risk of a drop in prices of securities and, therefore, loss of assets. Someone may suppose that the issuing company shall repurchase the shares from shareholders and is obliged to pay dividends. That is not correct.

First of all, shares are issued for an unlimited time period. If you do not want to participate as a shareholder in the company’s business any more, you can sell your shares in the open market. But the joint stock company is not required to repurchase the shares from its shareholders.

Secondly, dividends might not be paid by the decision of the general meeting of shareholders. Dividends are not paid if the company’s business is unprofitable.

How to purchase shares?

The purchase of shares is carried out as follows. Firstly, the client gives the order to the broker. The specialist will explain the process of shares purchase in details.

The Broker (broker and dealer company) passes the order to the stock exchange in its own name. The funds to amount of the transaction cost are written off of the client’s broker account. The securities purchased in the result of transactions are deposited in the account with the depositary which keeps records and stores securities and performs re-registration of the title to the purchased securities to the client.

The transaction is registered immediately at the stock exchange as soon as two or more matching orders meet subject to the condition that their prices are equal or the price of the best purchase order is higher or equal to the price of the best sale order.