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What is the Difference Between Stocks and Shares?

A. Preble
A. Preble

Stocks and shares are both investment terms having to do with the stock market and publicly traded companies. A stock is a piece of ownership in a company. Shares are a unit of measure for stocks. Stocks and shares are both terms used to describe the slice of a company owned by an investor, with stocks generally denoting any and all investments made by a person and shares describing the number of pieces of a particular company owned.

One way a company can raise capital is to issue shares of stock, which are equal pieces of company ownership. An investor can purchase any number of shares of stock in a company, making him a shareholder or stockholder. Shareholders are entitled to a portion of company profits and have the right to vote on certain company policies and decisions. The more shares in a company a stockholder owns, the more say he has in company matters, which is why the majority of shares are usually closely held by the owners or founders of a company once it goes public by offering shares for sale.

Shares are a unit of measure to calculate stocks.
Shares are a unit of measure to calculate stocks.

One investor may hold multiple shares of stock in the same company or hold stock in many companies. Shareholders get paid dividends at the discretion of a company; they are not entitled to a set amount, and companies aren't required to follow a set payment schedule. Each share owned receives a separate dividend, and the amount paid to one shareholder is then multiplied by the number of shares. The desirability of shares can fluctuate somewhat depending on the rate at which dividends are paid in addition to profitability and a multitude of other factors.

Investors may also sell shares and either make or lose money, depending on the price per share when the stocks were first purchased and the current selling price. As a company's profitability increases, so does the price investors are willing to pay per share; this is called the face value of a stock. Investors make money by purchasing when the stock price is low and selling when it is high. The entire investment is at risk, because a multitude of market changes and company changes affect the price of stocks at any given time. Investors can trade as many or as few shares as they please at any time, so those with many shares in one company have more to gain and to lose each time the face value of a share fluctuates.

Stocks and shares are not, technically, the same thing. That doesn’t keep people from using the terms stocks and shares interchangeably to describe a unit of capital of a publicly traded company. The terms stockholder and shareholder are also used, rightly or wrongly, to describe the same relationship between a company and its investors.

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    • Shares are a unit of measure to calculate stocks.
      By: Monkey Business
      Shares are a unit of measure to calculate stocks.