Whenever a company decides to pay out some of its profits (normally in the form
of a dividend) this comes on top of any growth in the share price and it could therefore
increase your returns even further. Not all companies pay dividends, however, as
many prefer to reinvest their profits and aim for further growth potentially increasing
the share price further.
Of course, there is the other side of the coin. Companies that are having difficulties
are likely to see their share price fall, which could reduce the value of your holding
potentially leaving you with less than you invested. There are also times when the
majority of companies rise or fall in value, seemingly regardless of their individual
merits. Shares in aggregate are sensitive to general economic conditions in a country
or a region.
Significant world events can affect the market as a whole, or have an impact on
individual sectors. For example, when Hurricane Katrina hit oil refineries in the
Gulf of Mexico it had an immediate effect on oil companies, but there were also
implications for businesses that rely on oil and fuel, such as airlines.