People often interchange stocks and shares without knowing they may differ. Most use these two terms to refer to either equities/securities or commodities. However, the distinction between stock vs. share in the financial markets seems blurry or more like a thin line. Meanwhile, in the tone of American English, you can use both words interchangeably to refer to financial equities, specifically, securities representing ownership in a public company.
Furthermore, in the good old days of paper transactions, you can call both of them “stock”. Nonetheless, presently the difference between the two words has more to do with syntax (more like procedures or ways they handle things respectively).
Hence, in this article, we’ve come to disclose the difference and comparison between stock vs. share. You have to pay close attention if you must learn their differences. Although the page is well self explanatory.
What Is A Stock?
In our description of stocks, we’ve chosen to confine ourselves to equities and the equity markets to make it easily understandable. Investment professionals often use the word stocks to relate to companies. Although, majorly publicly-traded companies. They might relate it to either stability stocks, large- or small-cap stocks, value stocks, food-sector stocks, blue-chip stocks, etc. In any of the cases, these classifications don’t refer so much to the stocks themselves but to the corporations that issuing them.
Meanwhile, we’ve two major ways people refer to stock they include Common and preferred stocks. They both carry different privileges and rights, and trade at varied prices.
Hence, whenever you hear people talking about the stock of a company, they often refer to their common stock. “Common stock” represents the term used to describe shares of ownership in a corporation and the type of stock mostly invested in. So, most time people talk about stocks, they usually refer to common stock. Thus, you’d find the great majority of stocks issued in this form.
Furthermore, common shares represent a claim on dividends (profits) and grant voting rights. Investors most often have a vote per share they own to elect board members who oversee the major verdicts made by management. Therefore, stockholders can exercise control over corporate policy and management issues, unlike preferred shareholders.
What Is A “stake?”
A stake often relates to the amount of stock an investor owns. Therefore, when you acquire stock in a given company, your stake signifies the percentage of its stock that you own.
However, stakes do not certainly need to relate to stock ownership. Instead, we use the term “stake” more generally to convey partial ownership in a company. For example, if you decide to buy an investment property with a business partner together, you can say that both of you own a stake in the property even though it doesn’t have a formal stock structure.
Interestingly, we also consider bondholders as stakeholders in a company because they will benefit if the company functions well.
Additionally, sometimes if you invest in a smaller, non-public company, it might result in you receiving a stake in the business to compensate for your investment. For instance, if a company seeks to raise $50,000 in exchange for a 20% stake in its business, investing $50,000 in that company may entitle you to 20% of profits coming from the business going forward.
What Is A Share?
A share simply refers to the single smallest denomination of a company’s stock. So if you divvy up stock and refer to specific characteristics, the proper word to use is “share”. Hence, more technically shares represent units of stock.
Thus, the company allows “common shareholders” to vote on company referenda and personnel. However, “preferred shareholders” do not have voting rights, but, they have priority in receiving back their investment if the company goes bankrupt. The two types of shares may pay dividends, but the “preferred class” have more guarantee to receive their pay first if they declare a dividend (profit).
Additionally, although the two main forms of stock shares include common and preferred, the companies can customize different classes of stock to fit the needs of their investors.
What’s The Difference Between Stock Vs. Share
If you’ve read through to this point, you can obviously differentiate between stock vs. share. Among the two, “stocks” is the more generic term. We often use it to describe a slice of ownership of one or more companies. Contrarily, “shares” have a more specific meaning. It often relates to the ownership of a particular company.
So, when someone says they “own shares,” some people would tend to respond, “shares in what company?” Likewise, an investor may tell his/her broker to buy 100 shares of XYZ Inc. However, if they say “buy 100 stocks,” they refer to a whole panoply of companies (100 different ones).
In addition, the comment “I own shares” might also prompt a listener to answer even more generally like, “Shares of what? Or What sort of investment?” You should worthily note that one can own shares of several kinds of financial instruments. Instruments like mutual funds, limited partnerships, real estate investment trusts, exchange-traded funds, etc. While stocks, on the other hand, completely refer to corporate equities/securities traded on a stock exchange.
You can see the table below for a more concise distinction between stock vs. share;
| Stock | Share |
|---|---|
| Stock refers to the company/firm that issues it. For instance Google stock. | A share refers to a unit of measurement of your ownership interest in a company. For instance, one share of IBM stock. |
| A stockholder owns stock in a company which can imply several things. | A shareholder owns shares of stock in a company. |
| Stock indicates a non-specific ownership interest in a company. | A share indicates a specific unit of ownership of a stock. |
Frequently Asked Questions About Stock Vs. Share
What is stock?
Companies usually issue stocks to attract investors to raise money to enable the company to expand, buy equipment, launch new products, or for other reasons. When you buy stock, you buy an ownership interest in the company with the expectation of earning a return on the investment.
What is a share?
A share includes a fraction of the stock. Typically it is the smallest denomination of Stock that comes in. Thus, since each share possesses its value fluctuating daily on the stock exchange, investors can easily estimate the value of their investment by calculating stock in shares.
Can I hold stocks and shares in my ISA?
Yes, you can hold stocks and shares in your ISA. Thus, the UK financial services regulator the FCA (Financial Conduct Authority) recognizes it as an investment.
Conclusion
Finally, we know investors often use the terms stock and share interchangeably, however, you still need to learn the difference between them. As earlier stated, stock represents a generic term referring to an ownership interest in a publicly owned company. While a share represents a specific term referring to the smallest denomination of a company’s stock.
So, if you own stock in a company, you consequently own shares of that company’s stock too. Meanwhile, if you have further questions relating to stock and shares, you can ask us in the comment box below.