ORDINARY SHares is the type of investment that as to do with variable income[if yes explain ,if no give reason]?
Yes, ordinary shares are a type of investment that is associated with variable income.
Explanation:
Ordinary shares, also known as common shares or equity shares, represent ownership in a company. When you invest in ordinary shares, you become a shareholder and have the potential to earn returns through two primary mechanisms - capital gains and dividends.
1. Capital Gains: The value of an ordinary share can fluctuate over time based on various factors such as the company's financial performance, market conditions, and investor sentiment. If the share price increases from the time you purchase it to the time you sell it, you can make a profit, which is known as a capital gain. Conversely, if the share price decreases, you may incur a loss.
2. Dividends: Companies may distribute a portion of their profits to shareholders in the form of dividends. Dividends are usually paid out regularly, such as quarterly or annually. However, the amount of dividends can vary. Sometimes companies may increase or decrease their dividend payments based on their financial situation, business strategy, or market conditions. Therefore, the income from ordinary shares in the form of dividends is not fixed and can fluctuate.
It's important to note that investing in ordinary shares carries a higher level of risk compared to other investments, such as fixed-income securities like bonds. This variable income potential is one of the characteristics that differentiate ordinary shares from investments with fixed income.