As a beginning investor, you might be wondering how are shares vs stocks different? You hear about people investing in the stock market, they’re buying stocks. Then you hear people say they own shares of a company because they bought stocks.
While these two financial terms are sometimes used synonymously, they have slight distinctions between them.
So, if you’re interested in investing in the stock market, you might be wondering how the term stocks and shares are used the same way, but may not be exactly the same. Read on to learn more about shares and stocks.
What Are Stocks?
A stock is a type of security issued by a company. The company might decide it wants to raise some money. So, it issues stocks that become available for investors to buy.
When an investor buys stock from a company, they now own a part of the company. It used to be before technology, that when you bought a piece of stock from a company you would actually get issued a paper stock certificate. The stock certificate showed proof of ownership in the company.
When you own a stock or multiple stocks from a company, sometimes you are paid a profit for your ownership of the company. It’s called a dividend. Some companies pay dividends monthly or quarterly, some pay them yearly.
What Are Shares?
While the term shares are often thought of the same way as stocks, it’s actually the smallest denomination of stock in a company. So, when you invest in stocks, through platforms like Monex, purchasing the stock means you own a share of the company.
So, you might hear someone say they own shares of a company. This means they own stock in the company and that stock gives them a share of ownership in the company.
As an investor, you typically hear the term shares in connection with stocks. Although it can be used in conjunction with other types of investments. For example, you might have invested in a mutual fund and own shares of the fund. Some companies do profit sharing. In this scenario, you get to share in the profits made by the company.
What Are the Differences With Shares and Stocks?
While you might be starting to see a distinction, let’s go a little further with shares vs stocks. Since a share is the smallest denomination of stock, you might say you own shares in a company which simply means you own multiple pieces of stock.
The shares that you own represent your part ownership of a company because you bought their stock.
Shares Vs Stocks, Understanding the Difference
As an investor, you’ll quickly learn to understand the key differences in shares vs stocks. While they are sometimes referred to as the same thing, you know as an investor, that one is only a part of the other.
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