12 Oct
Stock and shares are both investments, but they’re not the same thing. Although investors often use the terms stock and share interchangeably, they have an essential difference. Both share and stock have similar applications but differ in their functions, tax treatment, and ownership structure. Investors need to understand stocks vs. shares before investment. The owner of a stock owns shares of multiple companies, whereas an owner of shares owns shares of a specific or single company.
What are Stocks?
Stocks are securities that provide ownership to an individual in a publicly traded company. Stock is a broad, and general term that represents ownership in one or more than one corporation and gives its holder the right to vote on key issues affecting shares, like who sits on its board of directors and how much money it raises from investors.
There are several reasons investors buy stocks; some of them are as follows:
- For capital appreciation if the price of a stock rises.
- For Dividend payments when a corporation gives stockholders a portion of its earnings.
- Ability to vote shares and influence the company’s reasons, including; paying off debts, expanding the company in a new market, or launching new products.
What are Shares?
A share is a small denomination of a company’s stock. It represents ownership in that company. You can buy and sell shares on the stock market. However, owning a company does not provide direct shareholder influence over its day-to-day operations or entitle him to a fair portion of the earnings if paid out as dividends. As shares are marketable securities, you can buy or sell shares from the company or through an exchange where multiple buyers and sellers of different types of stocks exist.
Stocks Vs. Shares
| Stocks | Shares |
|---|---|
|
Generic term |
Specific term |
|
Stock is a broader concept representing a company's partial or whole ownership |
Shares are a specific concept representing an exact amount of company ownership. |
|
Refers to an ownership interest in a publicly owned company |
Refers to the specific denomination amount of the company |
|
When an individual buys a company's stock, he is not lending any money; instead, he is buying the percentage in a company. |
When an individual buys a share, he owns a small portion of the equity in the company. |
|
A person who owns stocks in a company is referred a stockholder. |
A person who owns shares in the company is known as a shareholder. |
|
Stockholders have a claim on the part of earnings and assets of a company |
Shareholders don't have a claim on the part of earnings and assets of a company they have invested |
|
Stocks provides information about the ownership of an individual |
Shares give information about an investment size |
|
Stocks include corporate equities and securities traded on a stock exchange. |
Shares include mutual funds, exchange-traded funds, limited partnerships, real estate investment trusts, etc. |
|
For example, if you say, 'I own a stock in Apple company,' you have invested in the company and own a portion of equity. The company has to pay you quarterly or annual dividends from the company's earnings. |
For example, if you say, 'I have 10 shares in Apple company, it means that you have exactly 10 ownership units in apple company |
Conclusion
To summarize, stocks and shares are similar investments that are not identical. While they represent ownership, some key differences can make one more suitable for your investment needs. In today’s highly evolved and sophisticated financial markets, investors must understand the difference between stocks and shares (stocks vs. shares). Shares are tradable securities. They represent a stake in an actual company and are easily liquidated if needed. In contrast, Stocks are non-tradable securities, representing ownership in a company, but they can’t be sold on the stock market.
Marjina Muskaan has over 5+ years of experience writing about finance, accounting, and enterprise topics. She was previously a senior writer at Invyce.com, where she created engaging and informative content that made complex financial concepts easy to understand.
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