What is a share or stock? It is the most common question asked by a first-time investor. When they think about how people earn money in the stock market.
Share is a type of security that represents the ownership of the issuing company. Companies divide their capital into shares to raise the money.
When the companies sell their shares to Shareholders; the shareholders become part of the company in their resources and earnings.
On the other hand, companies can raise funds to operate the business.
Who is a shareholder? Shareholders are those people in the market who owns shares and ultimately become the proportionate owner of the company.
In reward of investing their money in the company, shareholders get the dividend.
For example: If a company is issuing 10,000 shares of Rs. 10 each, and you buy the 1000 shares, then you become the 10% owner of the company and you have a 10% claim of the company’s earnings and assets.
Moreover, a shareholder can be the owner of one or more companies. And can also own shares of a different kind of financial instruments like Mutual Funds, Exchange Traded funds, Government securities, etc.
Types Of Shares in India
CLASSIFICATION OF SHARES BASED ON OWNERSHIP
1. Common Stock: Common stockholders have the right to vote at the shareholder’s meeting and receive the dividend on their purchased shares.
Dutch East India Company was the first company to issue the Common stock in 1602. These shares are also known as Ordinary Shares.
2. Preferred Stock: Preferred stockholders don’t have any voting right at shareholder’s meeting. But they have higher and priority claims right on the company’s resources and earnings as compares to Common stockholders.
The payment of the dividend is guaranteed in Preferred stocks. These shares are also known as Preference Shares.
CLASSIFICATION OF SHARES BASED ON MARKET CAPITALIZATION
1. Large Cap Stocks :
Frequently Asked Questions (FAQ)
The words “Share” and “Stock” can be used interchangeably due to the American language.
Shares are bought and sold at the share market. If you want to buy and sell shares then you will need to have a trading and Demat account with the Share brokers.
Investment in shares gives profit in the two-manner dividend plus capital gain. When people sell shares higher than the buying price they earn money as a capital gain.
To buy shares you will need to follow the following steps
1. Open a Demat and Trading Account with a stock broker.
2. Add money to your trading account.
3. Login to your trading account or call your broker to buy shares of your preferred company.