I haven’t written much lately on the topic of investing, so I thought I’d share a few thoughts on the topic. Certainly making the decision to invest in a company requires quite a bit of analysis. There are several methods to gather information when researching a company for a potential investment; You could read past financial reports, do internet research, check public records, or browse webcheck via Duedil where you could find information on a company’s financial history, contact information, corporate structure, board of directors and litigations. What I want to address today though is the aspect of being a shareholder after you have already made an investment in a company.
As a shareholder, you are entitled to certain rights as an owner of the company. However, for you to exercise these rights appropriately, you need to stay informed about the ongoings of the company which you own. Here is what you need to know about being an informed shareholder.
Your Rights as a Shareholder
The main thing you should know about being a shareholder of a company is that you are considered an owner. There are many different levels of ownership rights, but the bottom line is that you own a part of the company. As such, you have a vested interest in the success of the company.
The main way you can exercise this right is by voting on major issues. Every year (at least) there is a proxy vote in which you can elect directors to represent you, and have a say on changes in the company, such as compensation or other issues. You can vote in person, but most people vote via mail.
As a shareholder, you are also entitled to dividends if the company elects to pay them. Since you’re an owner, you get a claim on assets, and one of the primary ways that companies share profits with their shareholders is to pay dividends.
What Else You Should Follow
Now that you know what you can do, you also need to know how you can be informed about the on-goings of your company. As a shareholder, you are entitled to review the corporate records and accounting practices. Most companies provide this information to shareholders through annual reports, which are mailed out annually. However, this isn’t always the case if you are a shareholder of a private company. In that case, you should be more diligent and ask to see copies of the profit and loss report and balance sheet. These statements allow you to see how business is going for the company, as well as any debts and assets the company may have.
By having an accurate snapshot of the company, you can be an informed shareholder, and make smarter decisions about your investment.
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