The phrases “stocks” and “shares” sometimes lead to investor misunderstanding in the ever-evolving environment of the Indian equity markets. However, it’s important to understand the little differences between them despite the many things in common they do have. In this piece, we’ll clarify the difference between stocks and shares.
In India, the expressions “stocks” and “shares” are interchangeable in daily speech, although their meaning differs a lot.
Stocks
Stocks refer to the ownership stakes in publicly traded businesses. Whenever one buy stock, he/she join the firm and take an appropriate portion of its liabilities and profits. The NSE and BSE are two major exchanges where these equities can be listed and traded by the market participants. The level of interest in the market for a company, its success, its management, its financial numbers, its future plans and other variables all affect stock prices.
Shares
The smallest part or unit into which a company divides or splits its whole share capital is referred to as shares. In simple terms, it is the stock of a company with the lowest denomination. The people or organizations that give money to the firm in order to buy its shares are referred to as shareholders.
Based on above definitions if a person has shares in many companies, it can be said that he/she own stocks. However, they only possess shares if they purchased shares in a particular corporation.
Classification of stocks:
Growth stocks see more earnings increase than the general market average. Therefore, market participants can expect good capital appreciation since they seldom give dividends. This kind of stock may be provided by an emerging IT business.
Income stocks continuously pay dividends and provide continuous revenue for investors. This includes reputable cash rich firms.
Value stocks hold low price-to-earnings (PE) ratios and are therefore far less expensive than those with a higher PE ratio. They could be growth stocks or income stocks and their shareholders can anticipate a good capital appreciation for such stocks.
Blue-chip stocks are the shares of large, well-known businesses with a track record of consistent growth. Typically, these stocks are popular among investors because of the company’s dependability.
Penny stocks are the shares of firms that have a low market price, frequently traded for just a few rupees or paisa per share. These are frequently being floated by small and little-known enterprises.
Classification of shares:
Preference shares provide their shareholders with an assured dividend payout. Additionally, they guarantee that if the firm fails, a priority claim will be made on its assets.
Common shares are paid out only when a firm is profitable and do not have the obligation of a predetermined dividend. Owners of these shares have voting rights for choosing the management, giving them influence over how the business operates.