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Script Splits and Issues

Sometimes firms offer shareholders three shares in proportion to the shares they own. For example, they may be offered one free share for every share owned. This is the script issue.

Alternatively, the shares are split. For example, every share, par or nominal value one dollar, is replaced by two shares, par or nominal value $.50.

In each case, the market value of the share will fall to half of the previous figure. The idea is that markets recognize a broad range of trading prices for shares. With growing profits and dividends over the years, the share price increases. Sometimes the market feels the new price is inconvenient and deter small shareholders from buying. The theory is that shareholder’s are happier with 100 shares at $50 than 10 shares at $500. If this doesn’t seem logical it is because it is, in fact, quite illogical-it’s pure investor psychology.

For example, UK market like shares in a range, say of £1-£10. Above this level, companies frequently do scripts or splits to bring the price down to a better trading price, one which is thought to lead to a more widespread holding and more liquidity. Thus, in the autumn 1998, the Logica Share price was £20. They did a four for one script issue to bring the price down to 4 pound sterling.

In US, the same idea prevails, but at much higher share price levels. On the continent of Europe, too, shares trade typically at far higher prices than in the UK. When the Paribas was privatized, for example, 3.8 million applied for the shares and received just four each-but the price was about $450. Switzerland is a place where traditionally, shares of the banks, pharmaceutical companies and Nestlé’s have traded at a price equivalent to several thousand dollars. However, the law, which required a minimum legal value of 100 per share, has been altered to lower this to 10 per share. In May 1992, Nestlé’s took advantage of to replace each share, legal value to 100, by 10, with a legal value of 10 each. The effect was to lower the price each from 9600 to 960.

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Investing In A Silver ETF

In previous decades investing in silver meant you purchased and physically held the silver you had invested in. Silver bullion bars most commonly but otherwise silver coins or another form of this precious metal. Today the most popular way to invest in silver is with silver ETF. This is an exchange traded fund. It means you have an investment in the silver without actually physically possessing the silver. Obviously this is much more practical for today’s lifestyles and great to be included in your financial plan.

The silver is held by a company, perhaps not even in the same country as you. They hold the silver but you buy it when you buy the silver exchange traded fund. The success of your investment is solely based on the market value of the silver itself. For this reason you shouldn’t be too concerned about which company physically holds your silver. If the company is doing poorly it will have no reflect on your ETF.

Experts recommend that serious investors have a 10-15% investment rate of precious metals in their portfolio. Silver has outshone the success of gold in recent times as far as profitability. Experts have noted that the fluctuation of the value of gold is larger than that of silver, making it a good choice for your first time in this market. This could be due to its continuing success in several and diverse markets around the world. Highly prized in the jewelry, electronic, coin and water industries this precious metal shows no signs of becoming obsolete.

The most popular and well known of all the silver ETF’s is the iShares Silver Trust Fund (SLV). The silver is physically held in London and prices are based on the London Silver Fix Price. An ideal place to start that offers minimal volatility. However there is many to choose from – some of the more commonly used are: ProShares Ultra Silver ETF (AGQ), PowerShares DB Silver Fund (DBS) and COMEX Silver Bull Plus ETF (HZU-TSX).

Investing in a silver ETF is an exciting way to expand your portfolio in a relatively low risk environment. Owning some of the precious metals in the world has to be a little bit more exciting than stocks and bonds too!

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