Home Markets Equity What is a Share or Stock? Know more about Shares and stocks

What is a Share or Stock? Know more about Shares and stocks

What is a Share

What is a Share?

A share is a small portion of the company ownership. By purchasing shares from the company or from the stock market, you become the part-owner of the company. You can earn profits of the company in the form of dividend. You can also further sell these shares and earn capital gain out of it.

Share is not a new term even for a layman. One is aware about the share market, rise in stock prices, collapse of share market, and most importantly, earning lot of money from this share trading activity. You must be also receiving calls from the share trading companies to open demat accounts and for trading in this venture. But let us go through the concept of share in detail from your perspective.

Advantages of Buying Shares

Please note that there is difference between buying shares and becoming a shareholder and the notion of trading in shares. We will first consider the advantages of buying and owning shares. Before buying shares, you must get well-versed with the process of buying shares. You can buy it either directly from the company or from the stock market. You must consider the essential elements of the company such as its nature of business, reputation, share prices, and its behaviour in the stock market, how does it interact with the shareholders. After purchasing these shares, you become the shareholder. In other words, you become the proud owner of the company! You are assigned voting rights for participating in the decision making activities of the company. Whenever the company makes profit, it pays you in the form of dividend on regular basis.

Well, now you should not follow a rigid approach when you become the shareholder. It means you must actively involve yourself in the shareholder and annual meetings of the company. You must also read the annual reports and financial statements of the company. You must raise questions regarding the company functioning and the dividend paid to you.

Advantages of Trading in Shares

The scenario remains the same in the case of share trading. You are still the part-owner of the company and have the voting and dividend rights. But now, you want to trade in the share market as an investor. You must always approach a trustworthy and knowledgeable broker or a sub-broker before trading in shares. Get sufficient knowledge about the share market. He may also provide you with good tips of share trading. You must not always rely on the broker and must trade independently sometimes with your intuition.

If you want to purchase or sell particular set of shares, then you can place an order for the same with your broker. The broker executes it accordingly. You need to be in constant touch with the share market, its rise and fall. If you are scared of taking risks in the event the share market collapses, then share trading is not your cup of tea at all. You must be willing to take calculated risks and also have the requisite amount of patience for safe trading.

Thus, though share is a small portion in the company ownership, it is a good form of investment for all types of investors. You must possess the adequate knowledge and the risk-taking ability.

Difference between Share and Stock

The term of share and stock means the same thing, of this stock is a common usage in America for shares. In India we term this as shares.

What is a Share Certificate

Share is the proof of ownership in a company. The physical proof of this ownership is a record called a share certificate. Today, shares are kept in electronic format or it is also termed as dematerialized format. You can still hold a share in a paper format, if you want.

This document is a proof of your share in the company. Your ownership in the company is in proportion to the number of shares you hold. In short, you are buying a partial ownership of the company.

A Simple Example :

Suppose a company issues 100 shares

Out of 100 issued shares, you are buying 10 shares of the company

Now you own 10 percentage of the company.

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  1. The share market has its own ups and downs. Owing to some shares means you owe a part of a company too. You can further sale your part of the shares. You earn a huge profit as well as dividend out of it. The share market is not for losers if you are someone who is scared of collapsing of the market.

  2. It’s awesome to be a part of something bigger and be able to vote on the progress of a company you care about, even when you are not employed there. There is wonderful opportunity to profit on the success of the company as well. But it is also a risk to own shares – their value fluctuates and that value is based on the decisions the company makes and how popular those decisions are.

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