More theory – the class system
As you may have already gathered, there are different types, or classes of capital.
But they can be broadly categorised as either debt or equity. Debt is borrowing.
There is a myriad of different ways to borrow from the market. But all debt must at some point be repaid.
Equity is different. Companies issue shares to raise cash.
Investors are buying a stake in the firm.
As such they shouldn't expect to see their investment repaid. If the company is liquidated, the taxman takes his chunk first, followed by the debt holders.
If there's anything left over, then it is returned to shareholders.
It is the equity market we are interested in.
As a beginner, most of the shares you will buy and sell will be traded on the London Stock Exchange.