Candlestick Trading Blog
April 3, 2009
Stocks and Shares
| The Difference between Stocks and Shares There is a difference between shares and stocks however these days both terms seem to be used interchangeably when referring to investing in the stock market. They both refer to the paper that represents ownership in a company, called the stock certificate but the difference between these two stock market terms in determined by the context in which they are used. When buying stocks and shares you learn that shareholders own shares of stock in a particular company. When an investor says they own stock, the question would then be "what company or companies do you own stock in, and how many shares do you own?" When a stock investor says they own or bought shares, the question would be, "what company do you own shares of stock in?" Again, the difference resides in the context in which this stock market terminology is used however they really are basically the same things. As stated above, when you own shares of stock in a particular company, you become part owner of that company. If the company performs well, then the value of your stock should rise over time. If the company performs poorly, then unfortunately the value of your stock investment will fall. Companies issue basically two types of stock to their shareholders, both of which are explained below. Common Stock is the type of stock that most investors own. When investing in stocks and shares, common stock in the basic form of ownership in a company. Those that hold common stocks have a claim on the assets of a firm after those of preferred stock holders and bond holders. Preferred stock is the other form of stocks that is issued to stock holders and it also signified ownership in a company. The safety of preferred stock in greater than the safety of that of common stock because the assets and earnings of preferred stock holders are paid first then the common stocks holders are paid. Why does a company issue stock? Companies will issue stock in order to raise money. Companies can also use other methods to raise money such as issuing bonds, or getting a loan but raising money through issuing stock does not create debt. It also does not create a legal obligation by the company to repay those funds. The difference between stocks and shares really is quite simple but it is important to know how and why both terms are used interchangeably. Hopefully you now have a clear picture if you didn't before. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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