Whenever a new investor comes to the investment world and wants to invest in the stock market. That time most investors were confused about stocks and shares and they had a question in their mind “ what is the difference between stocks and shares?”. Lots of investors still know that stocks and shares are the same but there is a measure difference, we will discuss that in this article.
Table of Contents
- What is stock?
- What is share ?
- difference between stocks and shares
- Factors to consider when choosing between stocks and shares
- How to buy stocks and shares
What is stocks?
A stock is also known as equity. It represents ownership of a company. When you buy a stock you will become a shareholder of that company which means you are a part owner of that company. You can trade stocks in stock exchanges like NSE , BSE.
Types of stocks : There are two main types of stocks. These are Common stock and preferred stocks. Common stock have the right to give shareholders voting and receive a dividend while preferred stocks don’t have the right to vote but receive a higher dividend.
Advantage of stocks : there are various types of advantages of stocks like long term growth and receiving dividends. Similarly there are also risks in stocks. The stocks price up and down as per market price you may lose your capital if the company does not perform well.
What is Shares ?
Shares also known as securities or stocks. It is a unit of ownership of a company that you can buy and sell. Shares are individual units that are makeup stocks. For example if a company has thousands of shares of stocks outstanding, each share represents 1/1000th ownership in that company.
There are two different types of shares : ordinary shares and preference shares. Ordinary shares have the right of voting and have the opportunity for receiving dividends. While preference shares don’t have right for voting but they received higher dividends.
Investing in shares will provide various advantages like long term potential growth and also receive dividends . It also involves risk when you invest in shares. That price will fluctuate and you may lose your money. It depends on company performance and market trends.
Difference between stocks and shares
There are key difference between stocks and shares here are some important difference :
Stocks represent ownership of a company, while share represents the individual unit of ownership that makes up a stock. When you buy a share that means you are buying a part of a stock. That represents part of ownership in a company.
Voting Right :
As a shareholder you have the right for voting, which means you are allowed to have a say in that company’s decisions. In the case of preferred stocks you don’t have voting rights and you can’t have a say in company decisions.
When a company grows and earns profit, they decide to share a part of profit in the form of dividend to their shareholders. In this case both stocks and shares both receive dividend payment.
The price of both stocks and shares can fluctuate every time, but the price of individual shares can fluctuate more than the price of stocks.
Risk is involved with both sides in stocks and shares also. It depends on company performance and market trends. If company performance is not good the stocks value will decrease, similarly if company performance will well the value of stocks increase.
But if a company goes bankrupt at that time the shareholder may lose their entire capital. So keep updating about the market to minimise your risk and save your capital.
Factors to consider when choosing between stocks and shares?
When you want to invest in stock market you need to know some factors :
You have to decide your investment goal, it will help you stay for a long period. The investment goal will help you to make a decision between stocks and shares. If you are looking for the long term then stock may be your better option. Similarly if you are looking for regular income then share offers a dividend that will help you more.
Investment is always involved with risk, but some investments are less risky than other investments. Shares will be a better option if you are looking for low risk. Shares are less volatile than stocks.
Your time horizon depends on how long your plan to hold your investment. Stocks will be a better option for long term investment while shares can be a better option for a short term investment.
The current market condition will help you make decisions, it will have a similar impact to stocks and shares. if market conditions downtrend then you may go for shares.
Company performance is the most important factor in making decisions to invest in stocks or shares. You have to research the company financial performance, earning report, growth potential etc. it can help you to make a decision.
How to Buy stocks and shares ?
When you decide to invest in stocks and shares, here are basic steps to follow how to buy stocks and shares.
Choosing a broker
To buy and sell in the stock market, you need to create a demat account with a broker. So it is important to choose the right broker. We have a list of top 10 popular brokers in India that will help you to choose a broker.
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Open an account
Place an Order
Once you complete the account opening process you can start to buy and sell in the stock market. You can place the order of choosing stocks , select quantity and place the order.
Monitoring your Portfolio
After you make an investment you need to monitor your portfolio regularly and check the performance of those stocks, and make adjustments if needed.
Understanding the difference between stocks and shares, it is important for everyone before investing in the stock market. We are also discussing what is stocks and what is shares, how to choose stocks and shares and how to buy stocks and shares. By understanding these factors it will help to make a decision to invest in the stock market.
No stocks represent ownership in a company , while shares represent the individual unit of ownership that make up a stock.
Most stocks have voting rights, but some stocks don’t have such as preferred stocks, certain shares.
Yes but not all stocks and shares offer them.
Both involve risk , but individual shares can fluctuate more than stocks.
You need to choose a broker to buy and sell stocks and shares, then open a demat account , place order and monitor your investment.