Stock vs Share: Understand the Difference

If you’re new in the market, you had found that the terms “stock” and “share” are used interchangeably, so many times or most of the time.

It is because they convey a similar meaning, either you look for the definition of share or the stock, you would find a similar answer which is, “ownership in a company”.

But this isn’t something which you’re looking for. You are here to get the answer to the question, “what is the difference between stock and share”. Before we get into every minute difference between these terms, let us quickly revise what these terms are.

What is Stock

Stock refers to the company that issues it which means stocks are indicated by the name of the company. For instance stock of TCS, stock of Infosys, stock of Dmart etc.

Types of Stocks

There are so many types of stocks based on various parameters.

1. Based on the size of the company

1.1 Blue-chip Stocks

Stocks of big well-known companies which have solid growth history.

1.2 Penny Stocks

Stocks of small companies are called penny stocks. and also known as microcap stocks, low-priced stocks.

2. Based on future potential

2.1 Growth Stocks

Stocks of this category grow and earn at a faster rate than the usual market average. As they rarely offer dividends, capital appreciation is what investors hope for as the capital gain becomes their only source of income.

2.2 Value Stocks

Stocks having a low price-to-earnings (PE) ratio are known as value stocks. So, they are much cheaper than those with a higher PE ratio.

3. Based on market capitalisation

3.1 Large-cap stocks

Stocks that have large market capitalisation.

3.2 Mid-cap stocks

Stocks that have neither large nor small market capitalisation.

3.3 Small-cap stocks

Stocks that have small market capitalisation.

What is Share

A share is the single smallest denomination of a company’s stock.

Stocks are divided into shares and each share is equal to a piece of the company’s ownership.

Types of Shares

1. Equity Shares

Generally, the shares which we all trade are known as equity shares.

Whenever someone would say something about shares, it is almost about the equity shares and that’s why they’re also called “common shares”.

Also known as “voting shares” because the shareholders of equity shares have the right to vote by which they can elect the members of the board of any company.

2. Preference Shares

Probably you would hear about “Preferred dividend”, the company give this type of dividend to its preference shareholders.

As the term itself suggests that the shares which have more preference (over the equity shares) are known as preference shares.

Difference Between Stock and Share

Well, there are a lot of subtle differences between the two. We will use some parameters to differentiate the stock and share:

1. Ownership

If someone says to you that “I invest in stocks” it means that person has stocks in his/her portfolio. But in return, if you say “I also invest in shares” then he/she would’ve asked you “of which company?”

It interprets that,

Stock represents the ownership in one or more companies.

Share refers to the single unit of ownership in a company.

2. Market price

Each stock has a different share price while each share of a particular company has the same price.

3. Specific-ness

Stock isn’t specific, it doesn’t tell you how much stock you own. But on the other hand, shares are specific.

As when you say, you invest in stocks. No one would ask, how much stock do you own of this or that company.

But if you say you invested in shares, you would also tell the quantity which you had traded. For instance, ” I bought/sold 100 shares of reliance industries today”

4. Holding limit

For stocks, there are no such restrictions such as you can’t invest in more than this specific no. of stocks or something like that.

For example, If you did plenty of good research and find out 10 stocks that could give you a good return and you started buying them and you end up buying 6 of those stocks and when you were going to buy the 7th stock on your list; no one would come and say that, “enough is enough, 6 was the limit, you can’t buy more stocks” because there is no such limit on buying stocks of different companies.

But while investing in shares of a particular company you could find some breakers which are:

  • Companies commonly place conditions on the purchase of shares to discourage one person from purchasing too many shares.
  • The person may be forced to publicly announce the intention to purchase a significant amount of shares and whether he or she plans to take over the company.
  • The name of such an investor having shareholding of more than 2% or so, will have his/her name specifically mentioned in companies annual reports.
  • There are certain trigger points, the first point is 5%, and as soon as you reach the holding to the level of 5% of the total shares of the company then thereafter with every change of 2% also a person needs to give disclosure.
  • A company declare someone as a “principal shareholder” if he/she has 10% of the total amount of shares of the company.

5. Return in addition

You can get additional shares of the company through the bonus issue or stock split, but you can’t get the additional stocks in the case if you’ve invested in stocks.

E.g. you invest in Reliance industries then you will be the shareholder of the reliance only, you wouldn’t get TCS stocks additionally.

Stockholder vs Shareholder

A stockholder is someone who owns stock in a company while the Shareholder is the owner of the shares of the company.

As we measure stock in shares, both the terms end up with the same meaning and that’s why we use both the terms as interchangeable.

Generally, people do not get confused between stockholder and shareholder but their real confusion lies in “Shareholder vs Stakeholder”.

A stakeholder is someone related to the company in any way. Creditors, debtors, suppliers, vendors, shareholders etc.; these all people are stakeholders of the company.

Conclusion

Stock

Share

Stock is the collection of shares

Share is the smallest unit of a stock

Two different stocks, generally do not have the  same market price

All shares of a company have same market price

You can own as many stocks as you want

You could face some restrictions if you try to buy more shares after a specific point

You do not get addtional stocks when you buy stock(s)

You are entitled to get additional shares from a company if you are its shareholder

Type of stocks: Growth stocks, value stocks, blue chip stocks, etc.

Type of shares: Equity shares and preference shares

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