Friday, February 1, 2008

Things To Ponder Before Buying An Investment

Many of us try to make future savings by buying shares as investments, which is a good business sense. However, some people are wary of buying shares, especially when these are considered minority stakes in a corporation.

To allay the fears of people who have minority shares in business, I will share with you an article I read, “Minority Shareholder Rights in California”, posted in March 2007. The article explains how the rights of minority shareholders are protected in California’s corporate setting.

According to the article, minority shareholders enjoy an important right which cannot be compromised by any corporate bylaw or majority shareholder action. This valuable right is the right to access of information.

Under California laws, shareholders have the right to inspect the corporation’s two important books – the record of shareholders and accounting books, records, and minutes of proceedings.

Why is this important? Because having access to this information will give you a hint on what is happening with the company and determine whether you are losing or gaining from your investment.

This is an important right a minority shareholder should keep in mind as protection for his investment.

Added to this, if a lawful inspection is refused, the courts may intervene and compel the corporation to forfeit the requested information.

Buying shares and stocks often involve risks. Here’s what to consider before buying shares or investments:

  • That you are part owner of the company – A company’s gain or loss is yours too.
  • Price shares may fluctuate in the short run.
  • Invest for a long-term plan. In buying shares, it is always good to buy low and sell high, which means that you should buy shares when the price is low and sell them high when demand increases.
  • Decide first how much you want to invest – In finance, you have to remember that the greater the investment, the higher the risks involved.
  • Research and do some homework before deciding on buying a certain share.

There are many ways of knowing your other rights as minority shareholders in a corporation. You can consult a business lawyer who is knowledgeable in corporate issues to give you more essential information on the matter.