All those who know about share trading have a fair idea about a listed company. But some do mistakenly use the same ratios to evaluate investment risks in unlisted companies. For those who are beginners, let’s start with what a listed company is. It is a company that has the permission to raise funds by selling ownership rights in the form of stocks, bonds and shares.

A publically listed company has many advantages over unlisted company right from more worth to ancillary benefits.

Liquidity
A listed company has all the information and annual reports present in the prospectus that reduces the apprehensions of the investors. The investors have the advantage of buying and selling the shares very easily and hence they have liquidity of funds. For privately owned companies, there is almost no liquidity, therefore they are valued lower.
Increased visibility
Though an intangible benefit, increased visibility of a company improves the image in the market. As per the common perception, the workings and the management of a publically listed company are far more organized and substantial. It indirectly affects the hiring and retention of top talent in the industry.

Generating finance alternatively
Private companies do not have easy access to public debt companies whereas listed companies enjoy the benefit of better credibility and hence have access to many different sources of finance.

More targeted approach
The company in the hope of going public becomes more structured in terms of both management and finance. The policies and business strategies are churned out in a clear and concise manner right from the first time. The right processes and formal structures are followed right from the beginning that paves the way for the future growth of the company.
A publically listed company has many advantages over the unlisted company but mere floatation does not guarantee success. You need to evaluate the equity and other ratios before anticipating the future prospects of a company. Eventually, you have to go beyond the difference of being listed and unlisted and make a decision as per your research and analysis.

Do you want to know how to grow your money by investing in shares and becoming a shareholder?  Would you know whether to go for a small but futuristic company or a larger company and be sure of your ownership in the business?

There are three different ways through which you can be a shareholder in a company:

Articles of Incorporation
Most of the companies these days are incorporated due to the many benefits it offers like protection from liability, protection from bankruptcy and divisibility in personal and professional assets. The sure shot way to become a part of the company is articles of incorporation. When you sign the Articles, you enter into a contract with the company about your ownership in the company. It does not involve any major formalities and you are a co-owner in minutes.

Buying shares from shareholders
Another way of becoming a part of the company is to buy shares from some other shareholder. This method is also widely used but it does have its own complications. Just buying the shares is not enough. You need to provide the company written evidence about your contract and also the share certificate of the previous shareholder. The new shareholder can still be denied his or her ownership as there are certain restrictions in private companies in terms of transferring shares.
Buying shares from the company

In this case, the company agrees to provide you the ownership of the shares instead of transferring the ownership as in the case of buying from other shareholders. On incorporation, the Articles must put the maximum number of shares as the condition of the agreement. As a result, the company cannot issue more shares unless a new resolution is formed involving all the shareholders.

The shareholders have their ownership secured once all the legal formalities are done and the company adds the person in its shareholder’s register. Being a shareholder, you become a part of company’s success as well as failure but with limited liabilities.

Make sure you study all the pros and cons of buying shares of a particular company and fulfil all the legal proceedings to win the co-ownership.

Share trading does seem to be a very lucrative and profitable venture but when it comes to picking up good shares and stocks, it becomes very challenging. No doubt, you can diversify your portfolio and can increase your net worth manifolds but it all requires thorough research and smart decision making.
Following are some tips for selecting good shares so that the process is bit simpler for you.

Ploughback
There are two parts in which the company’s profits are split: one is dividend that is shared among the stake holders and the second is ploughback i.e. the money kept by the company to invest it further for its growth. You can find these figures in normal balance sheet inspection of the company. The company who wants to expand and has long term vision in mind keeps good amount of money as ploughback. On the other hand, the company which is not focussing on the future keeps little for further investment. Therefore go for the stock that shows promise of future.

Your investment preference
Decide whether you are looking for a long term investment or short term gain. The companies that belong to the hottest and in-demand niche are quite profitable to invest in, but make sure to buy such stocks when the rates are low otherwise you won’t get any immediate profits. Good shares for long term investment are those that have earned a name in different sectors despite the highs and lows in the niche.

Do not follow advices as laws
If a stock has worked for your friend or is a broker’s recommendation, it is not a sure shot recipe of success. You should do your homework and analysis and remember your instincts. Make sure you don’t gamble your hard earned money just because somebody tipped it.

Price-earnings ratio
Although price-earnings ratio is a good indicator of investment, it needs to be used along with other technical analysis before making any decision. Use P/E ratio in context with the overall picture of the stock you are considering.
Always follow a strategy and go with it. Though there are exceptions to every bit of advice offered, these tips on selecting good shares will guide you towards the right path.