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Shares are securities, also known as dividend-paying stock. They are popular investment vehicles, including for long-term, systematic wealth accumulation. When shares are issued, the company receives new equity. When you buy shares, you become a shareholder – you buy a stake in the company. You become a co-owner of the stock company.

In other words, you share in the company’s success, but you also share in the risk if it fails. If business is good, you benefit from the upside: over time, your shares will be worth more than when you bought them. Ideally, you also share in the company’s profits through dividends. However, this also means that if earnings are poor, the share price falls, as does your share of the profits (dividend).

As a shareholder, you also generally have a say in how the company is run and can discuss and vote on important company decisions at the annual general meeting.

Not all shares are the same. Whether they are traded on a stock exchange or not, they can be distinguished, for example, by their transferability.

Bearer shares

When you as a shareholder buy shares on the stock exchange, you receive bearer shares. These can be easily transferred and traded. The rights associated with the shares (usually voting rights and the right to share in the company’s profits) belong to you. Bearer shares are the most common type of share.

Registered shares

Registered shares are, as the name suggests, registered in your name. They can only be transferred by a written declaration of intent (endorsement). Owners are registered by name in the company’s share register. Registered shares usually carry voting rights and the right to a share in the company’s profits.

Registered shares with restricted transferability

If you want to buy this type of dividend-paying security as a shareholder, you need the approval of the company’s board of directors. Registered shares with restricted transferability allow the company to keep track of its shareholder base and to prevent unwanted shareholdings by competitors – or takeover attempts. Again, voting rights and dividend rights go hand in hand.

Imagine you buy share X for CHF 175, while its nominal value is only CHF 150. As a new shareholder, did you make a mistake and pay too much?

Not at all! The amount you paid is the current market price, also known as the market value. The nominal value (face value), on the other hand, is the value at which the share was originally priced when it was issued. It represents the proportion of the company’s share capital.
You may be wondering why the market price is different from the nominal value.

Price increase

The following applies in general: the more demand there is for a share, the more its price will rise. If the company is doing well, investors often take a positive view and buy more shares and the price rises. Good news about an industry, the economy or the management of large companies can also influence investors and cause share prices to rise.

Price reduction

Conversely, poor corporate earnings and other negative news can cause share prices to fall. The same applies to geopolitical uncertainties or environmental events – usually, share prices “suffer” as a result, but experience shows they tend to recover relatively quickly. The latter is less of an issue, especially for long-term investors, who take a long-term view and take advantage of market rebounds.

Interest rate hikes and inflation are additional factors that can affect share prices.

You want to start building your wealth systematically. You have already defined your investor profile with your financial advisor. You have also defined your investment strategy, which should include shares.

You have laid the foundation for successful wealth building. You are now ready to start buying and selling shares (and other securities). For this you need a custody account.

It gives you access to different investment opportunities, not just shares. And it provides you with security for safe storage. Finally, a custody account helps you keep track of the performance of all your investments.

The easiest way to trade shares is to give your financial expert or your bank a wealth management mandate. Your assets will be managed according to the agreed strategy. In doing so, you rely on the experience and knowledge of professional investment experts.

Or you take responsibility and invest your money yourself. You can carry out your purchases and sales digitally, for example via an app (E-Banking) or online banking. You enter your buy or sell order in the app or online banking and confirm your transaction.

Traders, in turn, submit their buy and sell orders via the electronic trading system of the respective exchange operator. The system automatically sets the prices – with the aim of bringing as many buyers and sellers together as possible.

Very importantly for you as an investor, all market participants are treated equally, pricing is both efficient and transparent and the stock market environment is stable and strictly regulated.

There is no single investment instrument that is right for you. A combination tailored to you and your needs is critical to successful wealth accumulation.

Shares

Advantages: Unlimited profit potential; your return is based on price increases and dividend payouts.
Disadvantages: Potential losses can be as high as 100 percent; predictability of returns is impossible. Every transaction is subject to fees that reduce your return.

Bonds

Advantages: Small price fluctuations for bonds with a good credit rating, predictability of income (interest payments).
Disadvantages: Potential gains are limited, and potential losses are 100 percent in the event of the issuer’s bankruptcy.

Actively managed investment funds

Advantages: You do not invest in a single security, but rather in several (diversification) according to the respective investment fund. They therefore participate in the price performance of several securities, with only one transaction, which minimizes buying and selling costs compared to individual share investments.
Disadvantages: Dependence on the respective fund manager; you have no influence over investment fund decisions.

Passively managed investment funds (e.g. ETFs)

Advantages: Compared to actively managed investment funds, passively managed ones are less expensive because there are no subscription and/or redemption fees. In addition, management fees are significantly lower. Because Exchange Traded Funds (ETFs) track specific share indices, such as the Standard & Poor’s 500, the DAX or the Euro stoxx 50, they are inherently diversified.
Disadvantages: ETFs track the performance of their underlying indices, which generally excludes upside (as well as downside) movements. Also, as an investor, you have no direct influence because the process is automated.

Shares – also known as dividend-paying stocks – are subject to greater price fluctuations than other investment instruments. They are well suited for systematic, long-term capital accumulation in combination with bonds or mutual funds. As a shareholder, you are automatically a co-owner of the company in question. This gives you a voice at the general meeting, which in Switzerland is usually held annually.

In addition, you are usually entitled to a share in the company’s profits. This means that, depending on the company’s performance, you will receive a low, high or no dividend (profit distribution). In theory, shares offer unlimited profit potential, but at the same time, shareholders can suffer total losses. However, the history of the stock market shows that in the long run, the risk of investing in shares is lower the longer your investment horizon, because the chances of prices recovering increase.