What you are actually buying
An ordinary share is a unit of ownership carrying two rights that matter: a vote at the annual meeting, and a claim on residual profits. Residual is the important word. Employees, suppliers, HMRC and lenders all get paid first. What remains belongs to shareholders, and if nothing remains, shareholders get nothing.
That subordination cuts both ways. In liquidation, ordinary shareholders are last and usually receive zero. In success, there is no cap — bondholders get their coupon and nothing more, while shareholders take the whole upside.
Where returns come from
Only three places: dividends paid out, earnings retained and reinvested profitably, and changes in the multiple investors will pay for those earnings. Over long horizons the first two dominate. Over short horizons the third dominates completely, which is why the market can fall 30% in a year when nothing about the underlying businesses changed by 30%.
Listed versus unlisted
A listing gives you continuous pricing, regulated disclosure and the ability to sell on Tuesday. It also brings mark-to-market pain, short sellers and quarterly scrutiny. The same economic ownership held privately is far less liquid and far less transparently priced — which is why the same business can be worth visibly different amounts in the two settings.
The UK wrapper question
For a UK investor, where you hold shares often matters as much as which ones. Inside an ISA, dividends and gains are free of UK income and capital gains tax. Inside a SIPP, contributions attract relief but access is age-restricted. Held directly, you face dividend tax above the allowance and CGT on gains. Stamp duty reserve tax of 0.5% applies to most UK share purchases, but not to most AIM shares or to non-UK shares.
How you would actually trade it
Open an account with an investment platform, fund it, and buy. Costs to compare: dealing commission per trade, the platform's annual custody fee, the FX spread on overseas shares (frequently the largest hidden cost), and the bid-offer spread of the share itself, which on a small AIM company can exceed 5%.
Orders execute at the quoted market price, or through a Retail Service Provider system that gives a firm quote you can accept for a few seconds. Limit orders let you name your price; market orders take what is there.
UK holdings are usually nominee-registered, meaning the platform is the legal owner and you are the beneficial owner. That is fine, standard, and covered by FSCS protection up to the limit — but it is not the same as holding a share certificate.
What goes wrong
- You can lose everything. Equity is the first loss position in a capital structure. Carillion, Wirecard and Thomas Cook shareholders recovered nothing.
- Concentration. A portfolio of five shares is a bet on five management teams, not on the economy.
- Home bias. The UK market is heavily weighted to banks, miners, oil and tobacco, which is not a diversified view of the world.
- Volatility is not risk, but it is real. Global equities have fallen more than 40% peak-to-trough several times in living memory and taken years to recover.
- Platform failure. Assets are ring-fenced, but administration means delay and cost.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.