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Investing in Stock

March 23rd, 2009 at 01:44 am

When you invest in stocks and shares you are virtually buying a piece of the company. This saves them the cost of borrowing the money they need and it gives you the right to participate in their success by being paid a dividend at the end of each year, or by the value of your stocks increasing, so that when you sell them you make a profit.

There are two more ways you can benefit financially by investing in stock. Firstly, when you are paid a dividend, it is with money that has already been taxed. Therefore, you receive what is called franking credits that you can use to offset tax you may have to pay on other income. And secondly, if you hold those stocks for more than twelve months, you will receive a 50% reduction on the capital gains tax that you must pay.

Stocks and shares usually have good liquidity - meaning that if you need to, you can get your money out of that investment in as little as three days. When you compare this with the time it takes to get your money when selling real estate for example, you will see that investing in stock is a good way to put your money to work

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